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methode. 


1 

2 

3 

4 

5 

6 

MICROCOPY   RESOLUTION   TEST  CHART 

(ANSI  and  ISO  TEST  CHART  No.  2) 


1.0 


I.I 


!f  1^ 

y  ■•0 


12.2 
2.0 

1.8 
1.6 


^     >^PPLIED  IIVMGE 


1653   East   Main   Street 

Rochester,   Ne»  York         U609       USA 

(716)   482  -  0300-Ptione 

(716)  288-  5989  -Fox 


THE  CHROhaCLES 

OF  AMERICA  SERIES 

ALLEN  JOHNSON 

EDITOR 


THE 

RAILROAD  BUILDERS 


JOHN  MOODY 


■•r4Si; 


I 


« 


^''ikrti'" 


♦ 


TEXTBOOK   EDITION 

• 

THE  CHRONICLES 

OF  AMERICA  SERIES 

ALLEN  JOHNSON 

EDITOR 

GERHARD  R.   LOMER 

CHARLES  W.  JEFFERYS 

ASSISTANT  EDITORS 


t 
si 


THE 
RAILROAD  BUILDERS 

A  CHRONICLE  OF  THE 

WEEPING  OF  THE  STATES 

UY  JOHN  MOODY 


LVXET 


NEW    HAVEN:   YALE    UNIVERSITY    PRESt 

TORONTO:   GLASGOW,    BROOK    &    CO. 

LONDON:    HUMPHREY    MILFORD 

OXFORD     UNIVERSITY    PRESS 


Ob  4  ^v 


PROHtKry  ut- 

UKEHEAD  COLLEGE 

PORT  ARTHUR.         :        ONT. 


Copyright,  1919,  by  Yale  Vnirersity  Press 


PniNTED  IN   THE   UNITED  STATES  OF  AMERICA 


CONTENTS 


I. 

II. 

III. 

IV. 

V. 

VI. 

VII. 

VIII. 

IX. 

X. 

XI. 

XII. 


A  CENTURY  OF  ll.\ILU()AP   BI'ILDINT,    Page       1 


THE  COMMODORE  AM)  THE  NEW  YORK 
CENTRAL 


«0 
47 

(it 

»5 

HI 


THE  OREAT   PENNSYLVANIA  SYSTEM 

THE  ERIE  RAILROAD 

CROSSING  THE  .\PPALACHIAN   RANGE        ' 

LINKING   THE  OCEANS 

PENETRATINCi  THE  PACIFIC  NORTHWEST"      KW 

BUILDING  ALONG  THE  SANTA  Vt  TRAIL    -      1.54 

THE  GROWTH  OF  THE  HILL  LINES  "      I«.5 

THE  RAILROAD  SYSTEM  OF  THE  SOUTH      "      17» 

THE     LIFE     WORK     OF     EDWARD      H. 

HARRIMAN  193 

THE  AMERICAN  RAILROAD  PROBLEM  ill 

BIBLICXIRAPHV  "      i4S 

INDEX  "      «47 


vni 


THE  RAILROAD  BUILDERS 


CHAPTER  I 


A  CENTURY  OF  RAILROAD  BUILDING 


The  United  States  as  we  know  it  today  is  largely 
the  result  of  mechanical  inventions,  and  in  par- 
ticular of  agricultural  machinery  and  the  railroad. 
One  transformed  millions  of  acres  of  uncultivated 
land  into  fertile  farms,  while  the  other  furnished 
the  transportation  which  carried  the  crops  to  dis- 
tant markets.  Before  these  inventions  appeared, 
it  is  true,  Americans  had  crossed  the  Alleghanies, 
reached  the  Mississippi  Valley,  and  had  even  pene- 
trated to  the  Pacific  coast;  thus  in  a  thousand  years 
or  so  the  United  States  might  conceivably  have 
become  a  far-reaching,  straggling,  loosely  jointed 
Roman  Empire,  depending  entirely  upon  its  oceans, 
internal  watercourses,  and  imperial  highways  for 
such  economic  and  p>olitical  integrity  as  it  might 


2  THE  RAILROAD  BUILDERS 

achieve.  But  the  great  miracle  of  the  nineteenth 
century  —  the  building  of  a  new  nation,  reaching 
more  than  three  thousand  miles  from  sea  to  sea, 
giving  sustenance  to  more  than  one  hundred  mil- 
lion free  people,  and  diffusing  among  them  the 
necessities  and  comforts  of  civilization  to  a  greater 
extent  than  the  world  had  ever  known  before  — 
is  explained  by  the  development  of  harvesting 
machinery  and  of  the  railroad. 

The  railroad  is  sprung  from  the  application  of 
two  fundamental  ideas  —  one  the  use  of  a  me- 
chanical means  of  developing  speed,  the  other  the 
use  of  a  smooth  running  surface  to  diminish  friction. 
Though  these  two  principles  are  today  combined, 
they  were  originally  absolutely  distinct.     In  fact 
there  were  railroads  long  before  there  were  steam 
engines  or  locomotives.    If  we  seek  the  real  prede- 
cessor of  the  modern  railroad  track,  we  must  go 
back  three  hundred  years  to  the  wooden  rails  on 
which  were  drawn  the  iittle  cars  used  in  English 
collieries  to  carry  the  coal  from  the  mines  to  tide- 
water.    The  natural  history  of  this  invention  is 
clear  enough.     The  driving  of  large  coal  wagons 
along  the  public  highway  made  deep  ruts  in  the 
road,  and  some  ingenious  person  began  repairing 
the  damage  by  laying  wooden  planks  in  the  furrows. 


I 


A  CENTURY  OF  RAILROAD  BUILDING     it 

The  coal  wagons  drove  over  this  crude  roadbed  so 
successfully  that  certain  proprietors  started  con. 
strucfng  special  planked  roadways  from  the  mines 
to  the  nver  mouth.    I^gs,  forming  what  we  now 
call     t,es      were  placed  crosswise  at  intervals  of 
three  or  four  feet,  and  upon  these  supports  thin 
ra.ls.     hkew^e  of  wood,  were  laid  lengthwise. 
So  effectually  d.d  this  arrangement  reduce  friction 
that  a  smgle  horse  could  now  dmw  a  great  wagon 
filled  w,th  coal  -  an  operation  which  two  or  three 
teams    lungmg  over  muddy  roads,  formerly  had 
grea  difficulty  m  performing.    I„  order  to  lengthen 
the  hfe  o    the  road,  a  thin  sheeting  of  i^n  was 
presently  laid  upon  the  wooden  rail.    The  next  im 
provement  was  an  attempt  to  increase  the  dura- 
bility of  the  wagons  by  making  the  wheels  of  iron 
It  was  not.  however,  until  1767,  when  the  first  rails 
were  cast  entirely  of  iron  with  a  fiange  at  one  side 
to  keep  the  wheel  steadily  in  place,  that  the  modern 
roadbed  m  all  its  fundamental  principles  made  iu 
appearance.     This,  be  it  observed,  was  only  two 
years  after  Watt  had  patented  his  first  steam  en- 
gine and  it  was  nearly  fifty  years  before  Stephen- 
son built  his  first  locomotive.     The  railroad  origi- 
nally was  as  completely  dissociated  from  steam 
propulsion  as  was  the    '  * 


V"^^     OUip.  , 


4  THE  RAILROAD  BUILDERS 

existed  for  ages  before  the  introduction  of  mechani- 
cal power,  so  the  railroad  had  been  a  familiar  sight 
in  the  mining  districts  of  England  for  at  least  two 
centuries  before  the  invention  of  Watt  really  gave 
it  wings  and  tunned  it  to  wider  uses.    In  this  re- 
spect the  progress\f  the  railroad  resembles  that 
of  the  automobile,  which  had  existeu  .a  crude  form 
long  before  the  invention  of  the  gasoline  engine 
made  it  practically  useful. 

In  the  United  States  three  new  methods  of  trans- 
portation made  their  appearance  at  almost  the 
same  time  —  the  steamboat,  the  canal  boat,  and 
the  rail  car.    Of  all  three,  the  last  was  the  slowest 
in  attaining  popularity.      As  early  as  1812  John 
Stevens,  of  Hoboken,  aroused  much  interest  and 
imore  amused  hostility  by  advocating  the  building 
of  a  railroad,  instead  of  a  canal,  across  New  York 
State  from  the  Hudson  River  to  Lake  Erie,  and 
for  several  years  this  indefatigable  spirit  journeyed 
from  town  to  town  and  from  State  to  State,  in  a 
fruitless  effort  to  push  his  favorite  scheme.      The 
great  success  of  the  Erie  Canal  was  finally  hailed  as 
a  conclusive  argument  against  all  the  ridiculous 
claims  made  in  favor  of  the  railroad  and  pre- 
cipitated a  canal   mania   which   spread  all  over 
the  country. 


A  CENTURY  OF  RAILROAD  BUILDING     5 

Yet  the  enthusiasts  for  railroads  could  not  be 
discouraged,  and  presently  the  whole  population 
divided  into  two  camps,  the  friends  of  the  canal, 
and  the  friends  of  the  iron  highway.  Newspapers 
acrimoniously  championed  either  side;  the  ques- 
tion was  a  favorite  topic  with  debating  societies; 
public  meetings  and  conventions  were  held  to  up- 
hold one  method  of  transportation  and  to  decry  the 
other.  The  canal,  it  was  urged,  was  not  an  experi- 
ment; it  had  been  tested  and  not  found  wanting; 
already  the  great  achievement  of  De  Witt  Clinton 
in  completing  the  Erie  Canal  had  made  New  York 
City  the  metropolis  of  the  western  world.  The  rail- 
road, it  was  asserted,  was  just  as  emphatically  an 
experiment;  no  one  could  tell  whether  it  could  ever 
succeed;  why,  therefore,  pour  money  and  effort 
into  this  new  form  of  transportation  when  the 
other  was  a  demonstrated  success? 

It  was  a  simple  matter  to  find  fault  with  the 
railroad;  it  has  always  been  its  fate  to  arouse  the 
opposition  of  the  farmers.  This  hostility  appeared 
early  and  was  based  largely  upon  grounds  that 
have  a  familiar  sound  even  today.  The  railroad, 
they  said,  was  a  natural  monopoly;  no  private  citi- 
zen could  hope  ever  to  own  one;  it  was  thus  a  kind 
of  monster  which,  if  encouraged,  would  override 


t 


6  THE  RAILROAD  BUILDERS 

all  popular  rights.  From  this  economic  criticism 
the  enemies  of  the  railroad  passed  to  details  of  con- 
struction: the  rails  would  be  washed  out  by  rains; 
they  could  be  destroyed  by  mischievous  people; 
they  would  snap  under  the  cold  of  winter  or  be 
buried  under  the  snow  for  a  considerable  period, 
thus  stopping  all  communication.  The  champions 
of  artificial  waterways  would  point  in  contrast  to 
the  beautiful  packet  boats  on  the  Erie  Canal,  with 
their  fine  sleeping  rooms,  their  restaurants,  their 
spacious  decks  on  which  the  fine  ladies  and  gentle- 
men congregated  every  warm  summer  day,  and 
would  insist  that  such  kind  of  travel  was  far  more 
comfortable  than  it  could  ever  be  on  railroads.  To 
all  these  pleas  the  advocates  of  the  railroad  had 
one  unassailable  argument  —  its  infinitely  greater 
speed.  After  all,  it  took  a  towboat  three  or  four 
days  to  go  from  Albany  to  Buffalo,  and  the  time 
was  not  far  distant,  they  argued,  when  a  railroad 
would  make  the  same  trip  in  less  than  a  day. 
Indeed,  our  forefathers  made  one  curious  mis- 
take :  they  predicted  a  speed  for  the  railroad  — 
a  hundred  miles  an  hour  —  which  it  has  never 
attained  consistently  with  safety. 

If  the  American  of  today  could  transport  himself 
to  one  of  the  first  railroad  lines  built  in  the  United 


A  CENTURY  OF  RAILROAD  BUILDING     7 

States  it  is  not  unlikely  that  he  would  side  with 
the  canal  enthusiast  in  his  argument.     The  rough 
pictures  which  accompany  most  accounts  of  early 
railroad  days,  showing  a  train  of  omnibus-like  car- 
riages pulled  by  a  locomotive  with  upright  boiler, 
really  represent  a  somewhat  advanced  stage  of  de- 
velopment. Though  Stephenson  had  demonstrated 
the  practicability  of  the  locomotive  in  1814  and 
although  the  American,  John  Stevens,  had  con- 
structed one  in  1826  which  had  demonstrated  its 
^  ab'lity  to  take  a  curve,  local  prejudice  against  this 
mnovation  continued  strong.  The  farmers  asserted 
that  the  sparks  set  fire  to  their  hayricks  and  bams 
and  that  the  noise  frightened  their  hens  so  that 
they  would  not  lay  and  their  cows  so  that  they 
could  not  give  milk.    On  the  earliest  railroads,  there- 
fore, almost  any  other  method  of  propulsion  was  pre- 
ferred.   Horses  and  dogs  were  used,  winches  turned 
by  men  were  occasionally  installed,  and  in  some 
cases  cars  were  even  fitted  with  sails.    Of  all  these 
methods,  the  horse  was  the  most  popular:  he  sent 
out  no  sparks,  he  carried  his  own  fuel,  he  made 
little  noise,  and  he  would  not  explode.    His  only 
failing  was  that  he  would  leave  the  track;  and  to 
remedy  this  defect  the  early  railroad  builders  hit 
upon  a  happy  device.    Sometimes  they  would  fix  a 


8  THE  RAILROAD  BUILDERS 

treadmill  inside  the  car;  two  horses  would  patiently 
propel  the  caravan,  the  seats  for  passengers  being 
arranged  on  either  side.    So  unformed  was  the  prev- 
alent conception  of  the  ultimate  function  of  the 
railroad,  and  so  pronounced  was  the  fear  of  monop- 
oly that,  on  certain  lines,  the  roadbed  was  laid  as 
a  state  enterprise  and  the  users  furnished  their  own 
cars,  just  as  the  individual  owners  of  towboats 
did  on  the  canals.    The  drivers,  however,  were  an 
exceedingly  rough  lot;  no  schedules  were  observed 
and  as  the  first  lines  had  only  single  tracks  and  in- 
frequent turnouts,  when  the  opposing  sides  would 
meet  each  other  coming  and  going,  precedence  was 
usually  awarded  to  the  side  which  had  the  strong- 
er arm.     The  roadbed  showed  little  improvement 
over  the  mine  tramways  of  the  eighteenth  century, 
and  the  rails  were  only  long  wooden  stringers  with 
strap  iron  nailed  on  top.    So  undeveloped  were  the 
resources  of  the  country  that  the  builders  of  the 
Baltimore  and  Ohio  Railroad  in  1828  petitioned 
Congress  to  remit  the  duty  on  the  iron  which  it  was 
compelled  to  import  from  England.     The  trains 
consisted  of  a  string  of  little  cars,  with  the  baggage 
piled  on  the  roof,  and  when  they  reached  a  hill  they 
sometimes  had  to  be  pulled  up  the  inclined  plane 
by  a  rope.    Yet  the  traveling  in  these  earliest  days 


A  CENTT7RY  OF  RAILROAD  BUILDING     9 

was  probably  more  comfortable  than  in  those  which 
immediately  followed  the  general  adoption  of  loco- 
motives. When,  five  or  ten  years  later,  the  advan- 
tages of  mechanical  as  opposed  to  animal  trac- 
tion caused  engines  to  be  introduced  extensively, 
the  passengers  behind  them  rode  through  constant 
smoke  and  hot  cinders  that  made  railway  travel  an 
incessant  torture. 

Yet  the  railroad  speedily  demonstrated  its  prac- 
tical value;  many  of  the  first  lines  were  extremely 
profitable,  and  the  hostility  with  which  they  had 
been  first  received  soon  changed  to  an  enthusiasm 
which  was  just  as  unreasoning.    The  speculative 
craze  which  invariably  follows  a  new  discovery 
swept  over  the  country  in  the  thirties  and  the 
forties  and  manifested  itself  most  unfortunately  in 
the  new  Western  States -Ohio,  Indiana,  Illinois, 
nnd  Michigan.    Here  bonfires  and  public  meetings 
whipped  up  the  zeal;  people  believed  that  railroads 
would  not  only  immediately  open  the  wilderness 
and  pay  the  interest  on  the  bonds  issued  to  con- 
struct  them,  but  that  they  would  become  a  source 
of  revenue  to  sadly  depleted  statp  treasuries.   Much 
has  been  heard  of  government  ownership  in  recent 
years;  yet  it  is  nothing  particularly  new,  for  many 
of  the  early  railroads  in  these  new  Western  States 


10  THE  RAILROAD  BUILDERS 

were  built  as  government  enterprises,  with  results 
which  were  frequently  disastrous.  This  mania, 
with  the  land  speculation  accompanying  it,  was 
largely  responsible  for  the  panic  of  1837  and  led  to 
that  repudiation  of  debts  in  certain  States  which 
for  so  many  years  gave  American  investments  an 
evil  reputation  abroad. 

In  the  more  settled  parts  of  the  country,  how- 
ever, railroad  building  had  comparatively  a  more 
solid  foundation.    Yet  the  railroad  map  of  the  for- 
ties indicates  that  railroad  building  in  this  early 
period  was  incoherent  and  haphazard.    Practically 
everywhere  the  railroad  was  an  individual  enter- 
prise; the  builders  had  no  further  conception  of  it 
than  as  a  line  connecting  two  given  points  usually 
a  short  distance  apart.     The  roads  of  those  days 
began  anywhere  and  ended  almost  anywhere.    A 
few  miles  of  iron  rail  connected  Albany  and  Sche- 
nectady.   There  was  a  road  from  Hartford  to  New 
Haven,  but  there  was  none  from  New  Haven  to 
New  York.     A  line  connected  Philadelphia  with 
Columbia;  Baltimore  had  a  road  to  Washington; 
Charleston,  South  Carolina,  had  a  similar  contact 
with  Hamburg  in  the  same  State.    By  1842,  New    ^ 
York  State,  from  Albany  to  Buffalo,  possessed    I 
several  disconnected  stretches  of  railroad.     It  was    ' 


"esulta 
nania, 
»  was 
led  to 
(vhich 
its  an 


A  (EXTURY  OP  RAILROAD  BUILDING    1, 
not  unt^l  ,836.  when  work  w„,  begun  on  the  Erie 
Railroad,  that  a  plan  was  adopted  for  a  single  line 
reachnig  several  h„„dr«l  n.lles  from  an  obvious 
point,  such  as  New  York,  to  an  obvious  destina- 
tion   such  as  Lake  Erie.     Even  then  a  few  far- 
sighted  men  could  foresee  the  day  when  the  rail- 
road  tram  would  cross  the  plains  and  the  Rockies 
«ndlmk  the  Athntic  and  the  Pacific.    Yet.in  1850 

"T^*f  li"  """""'' '"  "''  ^■"•i«'  st«t«  lay 

east  of  the  Mississippi  Hiver.  and  all  of  them,  even 
«hen  they  were  physically  mere  extensions  of  one 
another  were  separately  owned  and  separately 
nianaged.  ^ 

Successful  as  many  of  the  «ih„ads  were,  they 
had  hardly  yet  esta.       ed  themselves  as  the  one 
preemment  means  of    ransportation.     The  camU 
had  lost  in  the  struggle  for  supremacy,  but  certain 
of  these  constructed  waterways,  particularly  the 
Erie,  were  flourishing  with  little  diminished  vigor 
The  nver    teamboat  had  enjoyed  a  development 
in  the  first  few  decades  of  the  nineteenth  century 
almost  a3  great  as  that  of  the  railroad  itself.    The 
Mississippi  River  was  the  great  natural  highway 
for  Uie  products  and  the  passenger  traffic  of  the 
South  Central  States;  it  had  made  New  Oriean, 
one  of  the  largest  and  most  flourishing  cities  in  the 


W  THE  R.VIIJIOAI)  ItUILDERS 

«.untry;  and  ...-rtainly  ,h..  nVh  »lton  planter  , 
the  f,  tK-s  .„uld  |.„v..  .,n,iW  ,t  „„^.  ,„^^,^.^ 
that  the  floating  imlae..,  "  which  phed  this  might 
stream  »o„ld  ever  surrender  their  pre«mi„enee  t 
the  rusty  and  .struggling  railroads  which  woun. 
along  lis  banks. 

This  period,  which  may  be  taken  as  the  firsi 
m  Amenean  railmad  development,  ended  about 
the  middle  of  the  century.    It  was  an  age  of  great 
progress  but  not  of  absolutely  assured  .success.    A 
few  lines  earned  handsome  profits,  but  in  the  main 
the  rai  road  business  was  not  favorably  regarfed 
and  railroad  investments  everywhere  were  held  in 
suspicion.    The  condition  that  prevailed  in  m.  .y 
railroads  k,  illustrated  by  the  fact  that  the  direc- 
tors of  the  Michigan  and  Southern,  when  they  held 
their  annual  meeting  in  1853,  had  to  borrow  chairs 
from  an  adjoining  office  as  the  sheriff  had  walked 
»wa,.  with  their  own  for  debt.     Even  a  rail^ad 
with  such  a  territory  as  the  Hudson  River  Valley 
and  extending  from  New  York  to  Albany  existed 
m  a  state  of  chronic  dilapidation;  and  the  New 
York  and  Harlem,  which  had  an  entrance  into  New 
\ork  City  as  an  asset  of  incalculable  value,  was 
looked  upon  merely  as  a  vehicle  for  Wall  Street 
speculation. 


inter  of 
[gestion 
mighty 
ence  to 
wound 

le  first 
about 

f  great 

'ss.    A 

;  main 

farded 

eld  in 

m;  ly 

iirec- 
held 

chairs 

liked 

Iroad 

illey, 

isted 

New 

New 

was 

reet 


A  CENTURY  OF  RAILROAD  BUILDING    13 
Meanwhile  the  increasing  traffic  in  farm  p^d- 

pl.nUt.on,  of  the  South  created  a  demand  for 
more  ample  transportation  faciliUes.    In  the  d«^ 

lines  of  railway  were  projected  and  some  of  these 
were  ass^ted  by  grant,  of  land  f„m  the  PeTeHI 
.ovemment    The  fi„t  of  these,  the  Illinois  Cen 
tra  ,  received  a  huge  land-grant  in  ,850  and  ultl 
»»tely  reached  the  Gulf  at  Mobile  by  c^nnectfel 
w-th  the  Mobile  and  Ohio  IUil..ad  .LT^^Z 
^nass-stedbyFederalgrants.    Butthepani   o" 
m7,  fo  lowed  by  the  Civil  War.  halted  all  rail- 
road enterprises.     I„  the  year  1856  some  .S600 
nules  of  railrnii.l  h.^  k 

onlv  70n  ,  *^^™"'  ^^  constructed;  in  1885 

only  700  were  Ia.d  down.  The  Southern  railroads 
were  prostrated  by  the  war  and  north  and  so'^ 
lines  lost  all  but  local  traffic. 

After  the  war  a  brisk  rccoveiy  began  and  brought 
to  the  fore  the  first  of  the  great  railroad  magnate 
and  the  shrewdest  business  genius  of  the  day  C^ 

l.fe  and  had  laid  the  basis  of  his  fortune  in  stl^m^ 
Wts  he         the  fir^t  man  to  appreciate  theTa^t 

b^utt  h  T""^'  "'  ^""-Portation  were 

about  to  changeplaces-thatwatertransportation 


'i 


III 


T    J 

■II 


14  THE  RAILROAD  BUILDERS 

was  to  decline  and  that  rail  transportation  was 
to  gain  the  ascendancy.  It  was  about  1865  that 
Vanderbilt  acted  on  this  farsighted  conviction, 
promptly  sold  out  his  steamboats  for  what  they 
would  bring,  and  began  buying'  railroads  despite 
the  fact  that  his  friends  warned  him  that,  in  his  old 
age,  he  was  wrecking  the  fruits  of  a  hard  and 
thrifty  life.  But  Vanderbilt  perceived  what  most 
American  business  men  of  the  time  failed  to  see, 
that  a  change  had  come  over  the  railroad  situation 
as  a  result  of  the  Civil  War. 

The  time  extending  from  1860  to  about  1875 
marks  the  second  stage  in  the  railroad  activity 
of  the  United  States.  The  characteristic  of  this 
period  is  the  development  of  the  great  trunk  lines 
and  the  construction  of  a  transcontinental  route 
to  the  Pacific.  The  Civil  War  ended  the  supremacy 
of  the  Mississippi  River  *»s  the  great  transporta- 
tion route  of  the  West.  The  fact  that  this  river 
ran  through  hostile  territory  —  Vicksburg  did  not 
fall  until  July  4,  1863  —  forced  the  farmers  of  the 
W^est  to  find  another  outlet  for  their  products.  By 
this  time  the  country  from  Chicago  and  St.  Louis 
eastward  to  the  Atlantic  ports  was  fairly  completely 
connected  by  railroads.  The  necessities  of  war  led 
to  gieat  improvements  in  construction  and  equip- 


vas 
tiat 
on, 
ley 
>ite 
old 
ind 

lOSt 

see, 
ion 

875 
'^ity 
this 
ines 
►ute 
acy 
rta- 
iver 
not 
the 

By 

ouis 
tely 
•led 
uip- 


A  CENTURY  OF  RAILROAD  BUILDING    15 

ment.  Business  which  had  hitherto  gone  South  now 
began  to  go  East;  New  Orleans  ceased  to  be  the 
great  industrial  entrepot  of  this  region  and  gave 
place  to  St.  Louis  and  Chicago. 

Yet,  ttough  this  great  change  in  traflSc  routes 
took  place  in  the  course  of  the  war,  the  actual  con- 
solidations of  the  various  small  railroads  into  great 
trunk  lines  did  not  begin  until  after  peace  had  been 
assured.  The  establishment  of  five  great  railroads 
extending  continuously  from  the  Atlantic  seaboard 
to  Chicago  and  the  West  was  perhaps  the  most 
remarkable  economic  development  of  the  ten  or 
fifteen  years  succeeding  the  war.  By  1875  these 
five  great  trunk  lines,  the  New  York  Central,  the 
Pennsylvania,  the  Erie,  the  Baltimore  and  Ohio,  and 
the  Grand  Trunk,  had  connected  their  scattered 
units  and  established  complete  through  systems. 

All  the  vexations  that  had  necessarily  accom- 
panied railroad  traflic  in  the  days  when  each  one 
of  these  systems  had  been  a  series  of  disconnected 
roads  had  disappeared.  The  grain  and  meat  prod- 
ucts of  the  West,  accumulating  for  the  most  part 
at  Chicago  and  St.  Louis,  now  came  rapidly  and 
uninterruptedly  to  the  Atlantic  seaboard,  and 
railroad  passengers,  no  longer  submitted  to  the  in- 
conveniences of  the  Civil  War  period,  now  began 


'1 


16 


THE  RAILROAD  BUILDERS 


to  experience  for  the  first  time  the  pleasures  of  rail- 
road travel.  Together  with  the  articulation  of  the 
routes,  important  mechanical  changes  and  recon- 
struction programmes  completely  transformed  the 
American  railroad  system.  The  former  haphazard 
character  of  each  road  is  evidenced  by  the  fact  that 
in  Civil  War  days  there  were  eight  different  gages, 
with  the  result  that  it  was  almost  impossible  for 
the  rolling  stock  of  one  line  to  use  another.  A  few 
years  after  the  Civil  War,  however,  the  present 
standard  gage  of  four  feet  eight  and  one-half  inches 
had  become  uniform  all  over  the  United  States. 
The  malodorous  "eating  -  ibs"  of  the  fifties  and 
the  sixties  —  little  station  restaun^nts  located  at 
selected  spots  along  the  line  —  now  began  to  dis- 
appear, and  the  modem  dining  car  made  its  ap- 
pearar^e.  The  old  rough  and  ready  sleeping  cars 
began  to  give  place  to  the  modem  Pullman.  One 
of  the  greatest  drawbacks  to  ante-bellum  travel  had 
been  the  absence  of  bridges  across  great  rivers,  such 
as  the  Hudson  and  the  ijusquehanna.  At  Albany, 
for  example,  the  passengers  in  che  summer  time 
were  ferried  across,  and  in  winter  they  were  driven 
in  sleighs  or  were  sometimes  obliged  to  walk  across 
the  ice.  It  was  not  until  after  the  Civil  War  that 
a  great  iron  bridge,  two  thousand  feet  long,  waa 


A  CENTURY  OF  RAILROAD  BUILDING  17 
constructed  across  the  Hudson  at  this  point.  On 
the  trains  the  little  flickering  oil  lamps  now  gave 
place  to  gas,  and  the  wood  burning  stoves  —  fre- 
quently in  those  primitive  days  smeared  with  to- 
bacco juice  —  in  a  few  years  were  displaced  by  the 
new  method  of  heating  by  steam. 

The  accident,  which  had  been  almost  the  pre- 
vailing rule  in  the  fifties  and  sixties  were  greatly 
reduced  by  the  Westinghouse  air-brake,  invented 
in  1868,  and  the  block  signaling  system,  introduced 
somewhat  later.    In  the  ten  years  succeeding  the 
Civil  War,  the  physical  appearance  of  the  railroads 
entirely  changed;  new  and  larger  locomotives  were 
made,  the  freight  cars,  which  during  the  period  of 
the  Civil  War  had  a  capacity  of  about  eight  tons, 
were  now  built  to  carry  fifteen  or  twenty.    The 
former  little  flimsy  iron  rails  were  taken  up  and 
were  relaid  with  steel.    In  the  early  seventies  when 
Cornelius  Vanderbilt  substituted  steel  for  iron  on 
the  New  York  Central,  he  had  to  import  the  new 
material  from  England.    In  the  Civil  War  period, 
practically  all  American  railroads  were  single  track 
lines  —  and  this  alone  prevented  any  extensive 
traffic.    Vanderbilt    laid    two    tracks    along   the 
Hudson  River  from  New  York  to  Albany,  and  four 
from  Albany  to  Buffalo,  two  exclusively  for  freight 


18 


THE  RAILROAD  BUILDERS 


and  two  for  passengers.  By  1880  the  American 
railroad,  in  all  its  essential  details,  had  definitely 
arrived. 

But  :n  this  same  period  even  more  sensational 
developments  had  taken  place.    Soon  after  1865 
the  imagination  of  the  American  railroad  builder 
began  to  reach  far  beyond  the  old  horizon.    Up  to 
that  time  the  Mississippi  River  had  marked  the 
Western  railroad  terminus.    Now  and  then  a  road 
straggled  beyond  this  barrier  for  a  few  miles  into 
eastern  Iowa  and  Missouri;  but  in  the  main  the 
enormous  territory  reaching  from  the  Mississippi  to 
the  Pacific  Ocean  was  crossed  only  by  the  old  trails. 
The  one  thing  which  perhaps  did  most  to  place 
the  transcontinental  road  on  a  practical  basis  was 
the  annexation  of  California  in  1848;  and  the  wild 
rush  that  took  place  on  the  discovery  of  the  gold 
fields  one  year  later  had  led  Americans  to  realize 
that  on  the  Pacific  coast  they  had  an  empire  which 
was  great  and  incalculably  rich  but  almost  inac- 
cessible. The  loyalty  of  California  to  the  Northern 
cause  in  the  war  naturally  stimulated  a  desire  for 
closer  contact.     In  the  ten  years  preceding  1860 
the  importance  of  a  transcontinental  line  had  con- 
stantly been  brought  to  the  attention  of  Congress 
and  the  project  had  caused  much  jealousy  between 


J 


A  CENTURY  OF  RAILROAD  BUILDING    19 

the  North  and  the  South,  for  each  region  desired 
to  control  its  Eastern  terminus.    This  impediment 
no  longer  stood  in  the  way;  early  in  his  term,  there- 
fore, President  Lincoln  signed  the  bill  authorizing 
the  construction  of  the  Union  Pacific -a  name 
doubly  significant,  as  marking  the  union  of  the 
Krst  and  the  West  and  also  recognizing  the  sen- 
timent of  loyalty  or  union  that  this  great  enter- 
prise was  intended  to  promote.     The  building  of 
this  railroad,  as  well  as  that  of  the  others  which 
ultimately  made  the  Pacific  and  the  Atlantic  coast 
near  neighbors  -  the  Santa  Fe.  the  Southern  Pa- 
cific, the  Northern  Pacific,  and  the  Great  Northern 
-  is  described  in  the  pages  that  follow.     Here  it  is 
sufficient  to  emphasize  the  fact  that  they  achieved 
the  concluding  triumph  in  what  is  certainly  the 
most  extensive  system  of  railroads  in  the  world. 
These  transcontinental  roads  really  completed  the 
work  of  Columbus.     He  sailed  to  discover  the  west- 
ern route  to  Cathay  and  found  that  his  path  was 
blocked  by  a  mighty  continent.     But  the  first  train 
that  crossed  the  plains  and  ascended  the  Rockies 
and  reached  the  Golden  Gate  assured  thenceforth 
rapid  and  uninterrupted  transit  westward  from 
Europe  to  Asia. 


t ' 


-u   ^f 

If 


CHAPTER  II 

THE   COMMODORE  AND   THE  NEW  VOBK   CENTHAL 

A  ««'HV  wa.  told  many  years  ago  of  Commodore 
\  8nderb.lt  whieh,  while  perhaps  not  strictly  true 
was  pointed  enough  to  warrant  its  constant  repe- 
tition for  more  than  two  generations.    Back  in 
the  sixties    when  this  grizzled  railroad  chieftain 
was  the  chie   factor  in  the  rapidly  growing  New 
Wk  Central  Railroad  system,  whose  backbone 
then  consisted  of  a  continuous  one-track  line  con- 
nectmg  Albany  with  the  Great  Lakes,  the  president 
of  a  small  cross-country  road  approached  him  one 
day  and  requested  an  exchange  of  annual  passes. 
_     Why  my  dear  sir, "  exclaimed  the  Commodore, 
my  railroad  is  more  than  three  hundred  miles 
long,  while  yours  is  only  seventeen  miles  " 

"That  may  all  be  so."  replied  the  other,  "but 
my  railroad  is  just  as  wide  as  yours." 
This  statement  was  true.    Practically  „o  rail- 
■"      -en  as  late  as  the  sixties,  was  wider  than 

SO 


road. 


THE  NEW  i-OBK  CENTRAL  «, 

ZT'  3^7 '^*'*''"""«'e-t"'cked  line,.   Even 
he  New  York  Central  system  in  1866  was  pZ 

could  not  ela,n.  to  any  particular  superiority  over 
h  s  ne.ghbors  and  rivals  in  this  particular.  CZ 
o    sneenng  at  his  "seventeen-mile"  collea«,e 

n:::;rf''''-~'>-dthatHi:Tw;' 

fine  system  had  grown  up  in  less  than  two  genera 

Teh  r''""«'7°-''-e."   The  Vanderbilt  lines 
«h  oh  today  with  their  cont«,lled  and  affiliatri 

road  -  a  la.ge  portion  of  which  is  double-tracked 

rikr-iT'  'r  ""■"  '''*'" """'  -<'  '-^h' 

...  le  1  ne  "/,''\''"'«'-"'  "'  «  «ttle  seventeen- 
fliP  \r  I,     ,  "  '■"'''•oad  was  known  as 

f-  '^^tau;y.     it  was  the  second  pon 

tiv    burnt  t         "'  "."'  ""  "  *'"'  """'  '°-»»- 

s,tL  ""■"■  "'*'  -"^  ''''■«  «'•»*'«.  made  a 

s..t.sfactory  trial  trip  i„  August,  1831. 

Hon  far  and  w,de  and  led  to  rapid  railroad  build- 
"  '"  """^^  P""^  °f  the  country  in  the  years 


««  THE  RAILROAD  BUILDERS 

immediately  following.  The  experiences  of  a  par- 
ticipant  in  this  trial  trip  are  described  about  forty 
years  later  in  a  letter  written  by  Judge  J.  L.  Gillis 
of  Philadelphia : 

11831  J.  I  left  Philadelphia  for  Canandaigua,  New  York 
traveling  by  stages  and  steamboats  to  Albany  and 
stopping  at  the  latter  place.  I  learned  that  a  locomo- 
tive had  arrived  there  and  that  it  would  make  its  first 
trip  over  the  road  to  Schenectady  the  next  day.  I  con- 
cluded to  he  over  and  gratify  my  curiosity  with  a  first 
ride  after  a  locomotive. 

That  locomotive,  the  train  of  cars,  together  with  the 

incidents  of  the  day,  made  a  very  vivid  impression  on 

my  mmd.    I  can  now  look  back  from  one  of  Pullman's 

1  alace  cars  over  a  pe.Iod  of  forty  years,  and  see  that 

tram  together  with  all  *he  improvements  that  have 

been  made  in  railroad  travel  since  that  time  I 

am  not  machinist  enough  to  give  a  description  of  the 

locomotive  that  drew  us  over  the  road  that  day,  but  I 

recollect  distinctly  the  general  make-up  of  the  train. 

Ihe  tram  was  composed  of  coach  bodies,  mostlv  from 

Ihorpe   and   Sprague's   stage   coaches,   placed    upon 

trucks.    The  trucks  were  coupled  together  with  chains, 

leaving  from  two  to  three  feet  slack,  and  when  the 

locomotive  started  it  took  up  the  slack  by  jerks,  with 

sufficient  force  to  jerk  the  passengers  who  sat  on  seats 

across  the  tops  of  the  coaches,  out  from  under  their  hats. 

and  m  stopping,  came  together  with  such  force  as  to 

send  them  flying  from  the  seats. 


THE  NEW  YORK  CENTRAL  « 

They  used  dry  pitch  for  fuel    and  .l,.~.  i.  • 
smoke  or  spark  catoh,-.„ti.    T'  "*'*  •*'"«  ■>» 

a  volume  of  lektToIe  Jr^''T"'^  °""°'''-'*^^^ 
sp-rks,  coals,  aXinde^  1 '7'' '' '"'r''""'"'  "'"' 
kn«th  of  the  train  Each  TZT""! '""''  ""'  *'"''^ 
l.a.l  an  umbrella  raii^  it  IT'""'*"'^"  "'''o 

smoke  and  fire  The^lereTundTt.?  """'"'  "" 
lary  protection.  forT  tTrkt  tl  «  .  "","  ""■'"™- 
urabrella  went  overhJ»,!H     ii  I  *"'  ""■«  ">*  '»•-* 

off  f^m  theiTet":;:^™''  ';s"iT"k  T' 

among  the  deck  passengers  ea^  I?    »«'*  took  place 
I"  put  out  the  fire     Th!„  "'""«'"'""«'''»' 

appearance  on'ar!Hng?tThe''fi^rUuoV7b  ™"T 

HniaTorrtt'tl'-'r""""-^^^^^^^^^ 

"»  a  -ore^'jLt     nT  'hTtfpTt;'''"''?  """"""^ 
al  Schenectady  "  °'  ""  ""^''n"'  Pl™e 

.Loll'™  tt.""  'a  :"""  7"  ?•"''  -  -■•'''"'^  - 

Plaled  trip  had  excited  „M  ".f "  °'  "«'  ~»'«"- 
from  it,  causing  a  lar,-e  In    .'■        ,  °* '"'"« "^"-"te 

■ntersecting  Zl  IVt^'Z:' T'"  ^'f  '"^ 
sether  with  his  wife  and  ,11  I,-  i,^.,  ^""y^x'^y-  to- 
.li»lanc*  with  all  kL,  „f  "'  '"""^  '"»»  » 

-"tofwhatw  ctmfn/a  "hSr^-  If  ^  «"»■ 
the  road  as  near  ,,  Ih.  ,T        ^^- ""'' '*">«  "P  to 

;-positi„„T:  eTaVt:ftTrii:"'^Asif'"*'"?^ 

"-  ."»-»  '-t  fright  and  wheIS?uptt«rb""'""' 
images,  and  wagons,  and  leaving  forT^,  "I     «*"'' 
"-.p.  -sengers  if  „„t  to  their  owne  s  Ld  t ,      ?" 
.-fvely  known  if  some  of  then:;' :;;;:,' ^^ 


u 


THE  RAILROAD  BUILDERS 


The  Mohawk  and  Hudson  Kailroad  wa»  oriei- 
nally  constructed  with  inchned  plane,  worked  by 
s  ationary  engines  near  each   terminu.,,   the  in- 
chnutions  being  one  foot  in  eighteen.    The  rail  used 
was  a  flat  bar  laid  upon  longitudinal  sills.     This 
type  of  ra,l  came  into  general  use  at  this  period  and 
continued  in  use  in  parts  of  the  countiy  even  as 
late  as  the  Civil  War. 

The  roads  that  now  make  up  the  New  York 
Central  were  built  piecemeal  from  1831  to  1833- 
and  the  organisation  of  this  company  in  the  latter 
year,  to  consolidate  eleven  independent  roads  ex- 
tendrng  f^m  Albany  to  Buffalo,  finally  put  an  end 
to  the  long  debate  between  canals  and  railroads. 
The  foundmg  of  this  company  definitely  meant 
that  transportation  in  the  United  States  hence- 
forth  would  follow  the  steel  route  and  not  the  water 
d.tch  and  the  towpath.     Canals  might  indeed  lin- 
ger for  a  time  as  feeders,  even,  as  in  the  case  of  the 
Erie  and  a  few  others,  as  more  or  less  important 
transportation  routes,  but  every  one  now  realized 
that  the  railroad  was  to  be  the  great  agency  which 

wouldg,vepUusibilitytotheindu,,trial„rgani.ation 
of  the  United  States  and  develop  its  great  territory 


THE  NEW  YORK  CENTRAL  „ 

Beside,  the  pioneer  Mohawk  and  Hud«,n,  thi, 

liJh  h'T  '"""''"'  ""  ''''"'  ""<*  Schenectady, 
which  had  been  opened  in  1836  and  which  had 

operated  p,«fitably  for  „any  yea».  always  payi'g 

large  dividends.  The  Tonawanda  Rail^ad.  ope^^ 

finished  m  the  same  year,  were  operated  wi^ 

rlZLTr""'^'^  by  the'newt:; 
in  1838  the  Auburn  and  Syracuse  and  the  Hudson 

andBerkshireRail^adswereopened.  Thelo^^ 
after  bemgmerged  in  1850  with  the  Rochester  and 
Wuse  I^.,way.  became  a  part  of  the  «>nsolid"  - 

1839,  the  Attica  and  Buffalo,  opened  in  1842,  the 
Schenectady  and  Troy,  opened  in  the  same  ^ear 
and  several  other  small  lines,  some  of  which  had 
undergone  various  changes  in  name  and  owner- 

Kailroad.    Th,s  great  property  now  comprised  five 
hundred  and  sixty  miles  of  railroad,  the  main  stem 
extendmg  from  Albany  to  Buffalo.    Though  it  had 
as  yet  no  connection  with  the  Hudson  River  RaU- 
mad  the  New  York  Central  Railroad  at  this  period 
was  the  most  subsUntial  and  important  of  Ameri- 
can ra,,road  systems.    It  developed  a  laige  and 
health:   through  traffic  to  the  Great  Lakes  and 


( .1 


«  THE  RAILROAD  BUILDERS 

wa,practicallyfreef«,mrailroadcomp«tition.  IT,, 
Eric  Hallway,  which  for  many  year,  had  been  strug- 
gling under  great  difficulties  to  reach  the  Great 
Lake,  and  had  gone  through  nearly  a  generation  of 
financial  vicsiludes.  was  jurt  getting  it,  through 
hne  actively  under  way.  The  Pennsylvania  Rail- 
road was  just  pushing  through  to  the  waters  of  the 

With  the  New  York  Central  for  the  lake  traffic.   The 

Baltimore  and  Ohio,  while  remotely  a  competitor. 

r«     r  |*«  P<">n»y'vania.  looking  more  for  the 

traffic  of  the  Ohio  Valley  than  for  that  of  the  Lakes 

The  period  of  six  years  following  the  consolida- 

^on  of  1853  was  one  of  great  prosperity  for  the 

New  York  Central  system,  and.  notwithstanding 

he  setbacks  to  business  caused  by  the  panic  of 

1857,  large  dividends  were  continuously  paid  on 

the  capital  stock.    In  the  year  1859  -  before  the 

VanderbiU  regime  opened  -  the  management  em- 

Draced  what  to  modem  men  of  affairs  are  famous 

names.  Erastus  Coming  was  president.  Dean  Rich- 

mond  was  vice-president,  and  John  V.  L.  Pmvn 

Nathaniel  Thayer,  Isaac  Townsend,  and  Chaunce; 

Vibbard  were  directors.     The  headquarters  of  the 

company  were  at  Albany,  and  the  stock  was  owned 

mainly  oy  residents  of  that  city. 


THE  NEW  YORK  CENTRAL  ft 

Meanwhile  the  building  of  raiWd,  in  other 
part,  of  the  State  and  under  other  leadership  waa 
going  forward  rapidly.    A,  far  back  a,  183«  the 
first  m,le  of  the  New  York  and  Harlem  Railroad 
via.,  opened  for  traffic.    This  single  mile  remained 
or  some  fme  the  only  property  of  the  company. 
I   extendcl  through  what  i,  now  a  thriving  part 
of  down-town  New  York.    Its  original  terminus 
was  at  Pnnee  Street,  but  the  line  was  afterwards 
extended  southward  to  the  City  Hall  and  later  to 
the  Astor  House.    It  was  not  until  1837  that  the 
road  reached  northward  to  Harlem  and  not  until 
84.  that  Williamsbridge  became  the  northl 
termmus.    The  line  was  looked  upon  as  a  worthless 
piece  of  property  until  mt.  when  it  was  extended 
north  to  Chatham,  to  connect  with  the  Albany  and 
btockbndge  Railroad,  and  thus  give  a  through  line 
from  New  York  City  to  Albany. 

Another  property  built  in  these  days  and  des- 
t.ned  to  become  eventuaUy  an  important  part 
of    he  VanderbUt  lines  was  the  Hudson  River 
Kailroad.    This  company  was  chartered  in  1846 
but  for  many  years  was  frowned  on  as  an  un- 
sound business  venture,  because  of  the  beUef  that 
.t  would  be  in  direct  competition  with  the  river 
traffic  and  therefore  could  never  be  made  to  pay. 


it- 

III: 


28  THE  RAILROAD  BUILDERS 

Nevertheless  the  promoters  went  ahead  and  by 
1850  the  road  had  been  opened  to  Poughkeepsie. 
Ihe  entire  hne  of  one  hundred  and  forty-four  miles 
was  completed  to  East  Albany  in  1851.    At  the 
same  time  the  Troy  and  Greenbush  Railroad,  ex- 
tendmg  six  miles  to  Troy,  was  leased,  thus  giving 
the  new  Hudson  River  Railroad  an  entry  inv.  the 
city  of  Troy.     The  Hudson  River  Rail  oad  was 
entirely  independent  of  the  New  York   Central 
enterprise  and  wps  controlled  in  those  early  days 
by  a  group  of  New  Yorkers,  prominent  among 
whom  was  Samuel  Sloan. 

As  we  enter  the  Civil  War  period,  we  find  the 
three  important  properties  which  were  afterwards 
to  make  up  the  Vanderbilt  system  all  developing 
rapidly  and  logically  into  the  strategical  relation 
ship  which  would  make  ultimate  consolidation  in- 
evitable.    The  completion  of  the  Erie  Railway  and 
Its  gradual  development  as  the  only  through  line 
across  the  State  from  New  York  to  the  Great 
Lakes;  the  opening,  expansion,  and  general  solidi- 
fication  of  the  Pennsylvania  lines  and  their  aggres- 
sive policy  of  reaching  out  to  the  lake  region  on  the 
west  and  across  New  Jersey  on  the  east;  the  exten- 
sion  of  the  Erie  interests  into  the  New  England 
field,  and  the  possibility  that  the  latter  might  gain 


THE  NEW  YORK  CENTRAL  » 

-v'th  New  York  C.t.v  and  the  Eastern  seabold 

During  the  Civil  War  h««. 

...ade  in  this  direc  o„     It  7       i  ""  T''""  ™^ 
vem  after  th   T  ""*  ""*■'  '»«»•  four 

;c;Xi^'"-:t*':-:  r  *"="*  '■"•^-  ™'^'- 

intervened  .  "  y*'"'"  ^^at  had 

-n  had  gin  to  b'Te  7""  ^'.^  "^"^-     '^'^ 
only  in  the  fill,,       '""""nating  genius,  not 

norld    f  «  ""'"''^'  •'^P^n^ion.  but  in  the 

world  of  finance  as  wr«ll     rr- 

Vanderbilt.    Cn  in   L    "  """'f  '''^  ^°™««- 
stanees  he  1.  ^  '"  ''"'•''  '"'"''''^  «™n'- 

a  jouth  had  elced  out  a  living  by  ferrvin.,  n. 

N^r  rty-T  '--^--Si- 
de Ls^thin  ""'    ""^  """■  ^  '"-  I'-dred 

por^tion  business.    F„„,  his  first  ferry^  """ 
o  nlr^fh-"  T  "'"'^^'"^-^^  -^  ■'' '^e 

-it:;?:::tr"'/--'---bo«t 


I860,  at 


an  age  when  most 


I 

f 

I 


*"  THE  RAllROAD  BUILDERS 

™en  are  beginning  to  retire  from  active  affairs,  the 

Commodore  •  -  as  he  waa  called  on  account  of 
h  3  nu„  fl       _  ^^^^^  ^^.^^^^  ,^^  ^^^ 

of  raJway  development,  management,  and  consoli- 
da  on.  The  extraordinary  charact  -r  and  genius 
of  the  man  are  well  depicted  by  the  event,  of  the 
.vears  that  followed. 

Before  the  opening  of  the  Civil  War  and  until 

.mmed.«.ely  after  its  end.  the  New  York  Centr  j 

and  the  E„e  systems  were  controlled  by  bitterly 

antagon,st,c  mterests.     These  interests  were  b^. 

g.nmng  to  foresee  the  day  when  extremely  aggres- 

-ve  competition  would  call  into  play  their  gr^est 

energ,es.     Va„derbilt.  wiser  than  his  ge„L^ 

foresaw  more  than  this.     His  vision  took  in  thj 

vast  future  values  of  the  properties  as  developed 

trunk   mes.  and  the  greater  possibilities  of  their 

control  and  operation  as  a  consolidated  whole. 

He  was  m  a  very  real  sense  the  forerunner  or  pio- 

neer  of  the  great  consolidation  period  of  a  half 

century  later.    He  was  the  Harriman  and  the  Hill 

oi  his  day. 

The  Krie  had  its  own  approach  to  New  York 
C.y,  but  the  New  York  Central  was  connected 
with  the  metropolis  only  by  the  river  and  the 
two   mdependent  roads  -  the  Harlem   Railroad 


THE  NEW  YORK  CENTRAL  „ 

and  the  Hudson  River  Railroad.  To  ,.r  the  latter 
wo  road,  under  his  c-omplete  control  was  Vander- 
b.lt  s  first  object.  He  would  then  have  unin.peded 
access  to  Now  York  and  so  bec„nu.  independent  of 
the  river. 

He  began  his  ambitious  plans  by  making  himself 
•1.    master  of  the  Harlem  property,  and  in  .so  doing 
got  h.s  first  experience  in  railroad  stock  n,anipula 
mn  and  at  the  same  time  picked  up  a  modLte 
fortune.     It  was  comparatively  easy  to  buy  the 
control  of  the  Harlem  Railroad.     The  Company 
had  never  pa,d  a  dividend,  and.  in  ,863,  when 
he  Commodore  quietly  began  his  work,  the  st«.k 
was  se  hng  below  thirty  dollars  a  share.  Before  the 
c  o.,e      this  year  he  ha  .  manipulated  the  stock  un- 
t'l  >t  had  reached  ninety-two.  and  by  a  comer 
^"August  of  that  year,  he  raised  it  to  179     On' 

th.sdealVanderbiltrea^.danicelitt,;fortune- 
b..t  evjdently  not  enough  to  enable  him  to  carry 
through  the  ambitious  plans  wnich  were  in  the 
back  of  h,s  head,  for  in  ,864  we  find  him  manipu! 
latmg  another  comer  and  this  time  m„„i„g  the 
pnce  of  the  stock  up  to  «85.    I„  this  wise  the  Com! 
modore  not  only  added  millions  to  his  already 
growmg  fortune  but  also  made  himself  a  power  i^ 
the  financial  world.    Financiers  began  to  fear  him 


•  V. 


**  THE  RAILROAD  BUILDERS 

and  he  found  it  co^parativelv  ea.,y  later  to  buy 
up  t  e  control  „f  the  Hudson  River  Rail^ad.  which 
he  d,d  by  pay,„g  about  roo  for  the  stock.  Then 
he  be,,,,,  .peculating  again,  sent  Hudson  River  up 
forlse'l"  "^"^"''"^^-•-'-^'-fortun: 
By  this  -ime  Vanderbilt  had  achieved  a  great 

d  "dends,  and  invented  wealth  as  if  bv  ^a"^ 
other  radroad  managers  now  began  to  5ay  ttt 

»u.hehad  done  with  theHarlen.  and  theHuds„: 
R.ver.    For  under  the  Commodore's  magic  touch 

"'  fou    years  the  earnings  of  the  Hudson  River 
property  had  nearly  doubled. 

One  of   the  first   properties    to   be  placed   at 
Vandcrbilt's  feet  was  the  New  York  Centa^and 
control  passed  into  ins  hands  i„  ,he  winter  of 
1800-6,.    He  was  now  in  a  powerful  position  and 
.nmed,ately  began  to  lay  his  plans  for  obtaintag 
control    f  the  Erie  Rail«.ad  in  the  following  yea" 
the  latter  effort  he  did  not  succeed,  how':^  ! 
-nd  after  a  protracted  and  dramatic  contest  he 
was  defeated   by  his  great   adversary.   "ITncle" 


THE  NEW  YORK  CENTRAL  s, 

Daniel  Drew.  The  story  of  thi,  contest  need  not 
be  detaj^ed  here,  as  it  is  given  i„  full  i„  the  chapter 
on  the  Erie  Railroad. 

In  the  fall  of  1869  the  Commodore,  having 
secured  everything  in  the  rail^ad  field  he  had 
sought  except  the  Erie,  put  through  his  scheme  for 
consohdafon.     The  New  York  Central  and  Hud- 
son R,ver  RaiWd  was  incorporated.    It  included 
the  old  New  York  Central  and  also  the  Hudson 
R.ver  Radroad  but  not  the  Harlem.    The  capital 
o.    he  consohdated  company  was  placed  at  ninety 
...".on  dollars,  a  figure  of  such  magnitude  in  those 
•lays  that  the  world  was  startled.    The  sv.stem  en,- 
braced  m  all  nearly  8S0  miles  of  railroad  lines      V 
few  years  later  the  Harlem  Railroad  was  leased 
to  the  property  at  a  high  valuation  and  a  large  divi- 
<lend  ,v^s  guaranteed  on  the  stock,  the  ownership 
■>!^\»ch  was  retained  by  the  Vanderbilt  familv 

The  Vanderbilt  system  as  it  is  now  underst'ood 
Really  began  with  these  transactions.  From  this 
t.me  on.  ,ts  history  has  been  similar  in  manv  re- 
spects to  that  of  other  large  systems  which  were 
the  outgrowth  of  merger  or  manipulation  in  these 
early  days.  During  the  remarkable  period  of  con- 
mereial  and  industrial  development  in  this  conn- 
try  fron,  1870  onward,  when  thousands  of  miles  of 


THE  RAILROAD  BUILDERS 


new  lin< 


built 


wh« 


the  growth 

of  iKjpulation  was  beginning  to  make  the  States  of 
Ohio,  Indiana,  and  Illinois  centers  of  wealth  and 
production,  and  when  the  wonderful  Northwestern 
country  embracing  the  States  of  Michigan,  Wis- 
consin, and  Minnesota,  was  so  rapidly  opened  up 
and  brought  nearer  to  the  Eastern  markets,  the 
\  anderbilt  railroad  interests  were  not  idle.     The 
original   genius,   Cornelius   Vanderbilt,    was  soon 
gathered  to  his  fathers,  but  his  son,  William  H. 
Vanderbilt,  was  in  many  ways  a  worthy  successor. 
By  1885  the  Vanderbilt  lines  had  grown  in  ex- 
tent and  importance  far  beyond  any  point  of  which 
the  elder  Vanderbilt  had  ever  dreamed.    Long  be- 
fore this  year  the  system  included  many  smaller 
lines  within  the  State  of  New  York,  and  it  had  also 
acquired  close  control  of  the  grfeat  Lake  Shore  and 
Michigan  Southern  system,  with  its  splendid  line 
from  Buffalo  to  Chicago,  consisting  of  more  than 
500  miles  of  railroad;  the  Michigan  Central,  owning 
lines  from  Detroit  to  Chicago,  with  many  branches 
in  Michigan  and  Illinois;  the  Canada  Southern 
Railway,  extending  from  Detroit  to  Toronto;  and 
in  addition  to  all  these  about  800  miles  of  othei 
lines  in  the  States  of  Ohio,  Indiana,  Michigan,  and 
Pennsylvania. 


THE  NEW  YORK  CENTRAL  35 

In  this  same  year    1885,  another  event  of  im- 
])i.rtance  took  i)lace.    The  New  York,  West  Shore 
and  Buffalo  Railroad,  which  after  strenuous  efforts 
extending  over  many  years  had  constructed  a  new 
trunk  line  from  W'eehawken  along  the  west  shore 
of  the  Hudson  to  Albany  and  thence  to  Buffalo, 
came  under  the  control  of  the  New  York  Central. 
The  great  system  in  the  Middle  W^est,  now  known 
as  the  "Big  Four,"  or  Cleveland,  Cincinnati,  Chi- 
cago and  St.  Louis  -—  embracing  750  miles  of  lines 
westward  from  Cleveland  and  Columbus,  Ohio,  to 
Indianapolis,  Springfield,  and  Cincinnati,  and  hav- 
ing traffic  connections  with  St.  Louis  —  was  also 
a  Vanderbilt  property  at  this  time,  although  not 
under  the  formal  control  of  these  interests.     An- 
other important  competing  line  secured  in  this 
period  was  the  New  York,  Chicago  and  St.  Louis, 
built  to  parallel  the  Lake  Shore  and  known  as  the 
"Nickel  Plate"  route.     This  road  extended  from 
Buffalo  to  Chicago,  and,  hke  the  West  Shore,  had 
been  constructed  with  the  hope  of  ultimately  selling 
out  ^o  its  competitor. 

The  development  of  railroad  properties  under 
the  Vanderbilt  influence  was  not  confined  to  the 
territory  east  of  Chicago  and  the  Mississippi  Val- 
ley.   As  early  as  1859  a  large  system  of  roads  had 


86  THE  RAILROAD  BUILDERS 

b'-en  merged  in  the  section  extending  westward 
from  Chicago  to  Omaha  and  radiating  throughout 
Iowa,  Minnesota,  Kansas,  Wisconsin,  Missouri,  and 
other  States.  This  company  was  known  as  the 
Chicago  and  North  AVestern  Railroad,  and  its  prop- 
erty, which  was  oi  '  of  large  and  growing  value, 
by  188G  embraced  a  system  of  over  3500  miles  of 
road.  Although  neither  controlled  by  the  New 
York  Central  nor  directly  affiliated  therewith,  it 
was  classed  as  a  Vanderbilt  property. 

While  for  many  years  after  the  death  of  the 
Commodore  the  Vanderbilt  family  remained  in  di- 
rect financial  and  operating  control  of  the  New 
York  Central  and  its  myriad  of  subsidiary  lines 
and  their  genius  as  railroad  builders  and  operators 
was  distinctly  evident,  yet  the  brains  and  resources 
of  the  Vanderbilts  were  not  alone  responsible  for 
the  brilliant  career  of  the  system  down  to  recent 
times.  William  H.  Vanderbilt,  though  a  man  of 
unusual  abihty,  did  not  possess  the  breadth  of  view 
or  the  sagacity  of  his  father,  and  in  the  course  of  a 
few  years  he  found  himself  exposed  to  a  cyclone  of 
public  criticism.  He  had  let  it  be  widely  known 
that  he  was  personally  the  owner  of  over  eighty- 
seven  per  cent  of  the  hundred  million  capital  of 
the  company.    In  1879  the  New  York  Legislature, 


THE  NEW  YORK  CENTRAL  87 

backed  by  the  force  of  the  popular  anger  and  sur- 
prise at  the  accumulation  of  a  hundred  million 
dollar  fortune  by  one  man  in  ten  years,  was  in- 
vestigating the  management  of  the  New  York 
Central  with  a  view  to  curtailing  its  power;  the 
rate  wars  were  on  between  the  seaboard  and  Chi- 
cago; and  Jay  Gould  was  threatening  to  divert 
all  the  traffic  of  his  Wabash,  St.  Louis,  and  Pa- 
cific lines  from  the  New  York  Central  and  turn 
it  over  to  other  Eastern  connections  unless  Van- 
derbilt  would  give  him  a  vital  interest  in  the 
V'anderbilt  lines. 

Vanderbilt  was  harassed  beyond  endurance  and, 
being  of  softer  material  than  his  father,  was  fearful 
of  the  outcome  of  public  opinion,  notwithstanding 
the  fact  that  in  a  moment  of  anger  —  according 
to  the  statement  of  a  newspaper  reporter  whose 
veracity  Vanderbilt  denied  to  his  dying  day  —  he 
had  used  the  familiar  expression,  "The  public  be 
damned ! "  There  were  intimations  that  the  Legis- 
lature was  planning  to  impose  heavy  taxes  on  the 
property,  solely  because  Vanderbilt  held  this  gi- 
gantic personal  ownership  in  the  property.  This 
prospect  frightened  him  and  he  consulted  friends 
whose  judgment  he  respected.  They  urged  him  to 
'ell  a  considerable  part  of  his  holdings  in  order  to 


u 


iiH  THE  RAILROAD  BUILDERS 

distribute  tlie  ownership  of  the  property  among  a 
large  number  of  people. 

This  plan  could  not  be  carried  out,  however,  in 
the  ordinary  way,  because  large  sales  of  stock  by 
the  \'anderbilt  interests,  if  the  speculating  and  in- 
vesting public  learned  that  he  was  making  them, 
would   greatly   depreciate   the   price   and    might 
create  general  demoralization  and  a  panic,  while 
they  would  certainly  injure  the  credit  of  the  New 
York   Central  property.     But  a  way  out  of  the 
dilemma  had  to  be  found.    It  was  at  this  juncture 
that  a  new  personality,  later  to  be  closely  identified 
with  the  Vanderbilt  lines  for  a  long  series  of  years, 
appeared  upon  the  scene.    Vanderbilt  was  advised 
to  consult  J.  Pierpont  Morgan,  of  the  banking 
house  of  Drexel,  Morgan  and  Co.    At  that  time 
the  name  of  J.  P.  Morg-.n  was  just  beginning  to 
come  prominently  to  the  front  in  banking  circles 
in  New  ^'ork.    The  Drexels  had  been  conspicuous 
in  business  in  Philadelphia  for  many  years  and  in  a 
sense  were  the  fiscal  agents  of  the  great  Pennsyl- 
vania Railroad  Company.     But  the  spectacular 
success  of  the  House  of  Morgan  a  few  years  before 
in  marketing  the  French  government  loan  in  Eng- 
land had  added  largely  to  its  prestige.     And  so 
Vanderbilt  concluded  that,  if  any  man  could  show 


THE  NEW  YORK  CENTRAL  30 

him  a  way  out  in  his  difficult  problem,  Pierpont 
Morgan  was  that  man. 

The  upshot  of  the  matter  was  that  Morgan 
devised  a  plan  for  the  sale  of  a  large  amount  of 
Vand  .bilt's  stock  holdings  through  private  sale  in 
England,  and  in  such  a  way  that  the  knowledge  of 
such  sale  would  not  become  public  in  America. 
A  confidential  syndicate  was  formed  which  under- 
took to  take  the  stock  in  a  block  and  pass  it  on 
to  English  investors  at  approximately  its  current 
market  price  of  about  $130  per  share.  The  sale 
was  promptly  accomplished;  the  stock  went  in- 
to the  hands  of  unknown  interests  abroad;  Van- 
derbilt  received  more  than  $25,000,000  in  cash, 
which  he  largely  reinvested  in  United  States  gov- 
ernment bonds,  and  the  Morgan  syndicate  reaped 
a  profit  of  about  $3,000,000.  Five  months  after 
the  closing  of  the  syndicate  public  announcement 
was  made  of  the  sale  and  of  the  syndicate  profit. 
The  striking  success  of  this  transaction  naturally 
added  greatly  to  the  prestige  of  J.  P.  Morgan  as  a 
financier  of  very  large  caliber,  and  it  had  the  satis- 
factory effect  of  curtailing  the  legislative  attacks 
on  Vanderbilt. 

From  that  date  forward,  the  history  of  the  Van- 
derbilt railroads  has  been  closely  identified  with 


*0  THE  RAILROAD  BUILDERS 

the  House  of  Morgan.  J.  P.  Morgan  and  his  busi- 
ness associates  became  the  company's  financial 
agents,  and  thereafter  all  plans  of  expansion  or  con- 
solidation were  handled  directly  by  them.  In  the 
board  of  directors  Morgan  banking  interests  had 
full  representation,  which  they  have  held  until 
this  day. 

The  subsequent  history  of  the  Vanderbilt  lines 
is  chiefly  a  story  of  business  expansion  and  growth. 
From  1885  to  1893,  the  great  panic  year,  the  New 
York  Central  each  year  added  to  its  mileage,  either 
by  merger  of  smaller  lines  or  by  construction.    All 
this  time  it  was  consolidating  the  system,  elimi- 
nating the  weaker  links,  and  strengthening  the 
stronger.    Its  lines  penetrated  all  the  best  Eastern 
railroad  territory  outside  of  New  England,  New 
Jersey,  and  Pennsylvania,  and  no  other  railroad 
system  in  the  country,  with  the  single  exception  of 
the  Pennsylvania,  covered  anything  like  the  same 
amount  of  rich  and  settled  territory,  or  reached  so 
many  cities  and  towns  of  importance.    New  York, 
Buffalo,  Cleveland,   Detroit,   Chicago,  St.  Louis,' 
Cincinnati,  Indianapolis  —  these  are  a  few  of  the 
great  traffic  centers  which  were  included  in  the 
Vanderbilt  preserves.    The  population  of  all  these 
cities,  as  well  as  that  of  the  hundreds  of  smaller 


THE  NEW  YORK  CENTRAL  41 

places  and  the  countryside  in  general,  was  growing 
by  leaps  and  bounds.     Furthermore  the  North- 
west, beyond  the  Great  Lakes  and  through  to  the 
Pacific  coast,  saw  the  l)eginnings  of  its  great  de- 
velopment at  this  time;  and  the  wheat  fields  of  the 
far  western  country  became  a  factor  of  profound 
im|)ortance  in  the  national  development.    Conse- 
quently when  the  period  of  depression  arrived  with 
the  panic  of  1893,  the  Vanderbilt  properties  were, 
as  a  whole,  in  a  strong  position  to  meet  the  changed 
situation  and,  like  the  great  Pennsylvania  prop- 
erty, they  all  passed  through  to  the  advent  of  the 
new  industrial  era  without  the  defaulting  of  a  bond 
or  the  passing  of  a  dividend.  The  remarkable  char- 
acter of  this  achievement  is  evident  in  view  of  the 
fact  that  in  the  period  from  1893  to  1898  more  than 
sixty-five  per  cent  of  all  the  railroad  mileage  in  the 
United  States  went  into  the  hands  of  receivers. 

After  the  close  of  this  era  of  panic,  the  Vander- 
bilt lines  began  expanding  again,  though  on  a 
much  smaller  scale  than  in  their  more  active  time. 
In  1898  William  K.  Vanderbilt,  then  president, 
made  the  announcement  that  the  New  York  Cen- 
tral had  leased  the  Boston  and  Albany  Railroad, 
at  that  time  a  lucrative  line  running  from  Albany 
across  Massachusetts  into  Boston.    This  gave  the 


i 

}  1 
1 

t 

j 

t 

1 

:r 

42  THE  RAILROAD  BUILDERS 

system  an  entry  into  the  New  England  field,  which 
it  has  continuously  held  since.  A  few  years  later 
this  New  England  interest  was  increased  by  the  ac- 
quisition of  the  Rutland  Railroad  in  Vermont,  thus 
making  connection  with  the  Ogdensburg  and  Lake 
Champlain,  a  line  running  across  the  northern  part 
of  New  York  State,  which  had  also  come  under 
Var.derbilt  control. 

When  business  revived  in  the  closing  years  of  the 
nineteenth  century,  the  history  of  American  rail- 
roads began  a  new  chapter.    Federal  railroad  regu- 
lation, which  started  in  a  moderate  way  with  the 
passage  of  the  Interstate  Commerce  Act  in  1887, 
had  steadily  increased  through  the  years;  the  Sher- 
man Anti-trust  Act,  passed  in  1890,  had  been  in- 
terpreted broadly  as  aflFecting  the  railroads  of  the 
country  as  well  as  the  industrial  and  other  com- 
binations.   These  influences  had  thus  greatly  cur- 
tailed the  consolidation  of  competing  lines  which 
had  gone  on  so  rapidly  during  the  decades  follow- 
ing the  Civil  War.    Railroad  managers  and  finan- 
ciers therefore  began  to  face  a  very  serious  problem. 
Competition  of  a  more  or  less  serious  nature  was 
still  rampant,  rates  were  cut,  and  traffic  was  pretty 
freely  diverted  by  dubious  means.     Consequently 
many  large  railroad  systems  of  heavy  capitalization 


THE  .NEW  YORK  CENTRAL  43 

bid  fair  to  run  into  diflScuIties  on  the  first  serious 
falling  off  in  general  business. 

Great  men  are  li  jually  the  products  of  their  ames 
and  one  of  the  men  developed  by  these  times  takes 
rank  with  the  greatest  railroad  leaders  in  history. 
Edward  H.  Harriman  had  risen  in  ten  years  from 
comparative  obscurily  and  was  now  the  president 
of  the  Union  Pacific  Railroad,  which  he  had,  in 
conjunction   with   the  banking   house  of  Kuhn, 
Loeb  and  Company,  reorganized  and  taken  out  of 
bankruptcy.    Harriman  was  one  of  the  originators 
of  the  "community  of  interest"  idea,  a  device  for 
the  partial  control  of  one  railroad  system  by  an- 
other.   For  instance,  although  the  law  forbade  any 
railroad  system  from  acquiring  a  complete  control 
of  a  competing  line  by  purchasing  a  majority  of  its 
capital  stock  or  by  leasing  it,  nothing  was  said 
about  one  railroad  having  a  minority  investment 
interest  in  another.    A  minority  investment,  even 
though  it  be  as  low  as  ten  or  twenty  per  cent, 
usually  constitutes  a  dominati..g  influence  if  held 
by  a  single  interest,  for  in  most  cases  the  majority 
of  the  shares  will  be  owned  in  small  blocks  by 
thousands  of  investors  who  never  co.nbine  for  a  def- 
inite, practical  purpose.     Thus  the  interest  which 
has  the  one  large  block  of  stock  usually  controls 


44  THE  RAILROAD  BUILDERS 

the  voting  power,  and  runs  little  risk  of  losing  it 
unless  a  contest  develops  with  other  powerful  in- 
terests  —  and  this  is  a  contingency  which  it  almost 
never  has  to  meet. 

Carrying  out  this  policy  of  promoting  harmony 
among  competing  lines,  the  New  York  Central  and 
Pennsylvania  Railroad  early  in  1900  acquired  a 
working  control  of  the  Reading  Company,  which 
in  turn  controlled  the  New  Jersey  Central  and 
dominated  the  anthracite  coal  traffic.     Later  the 
Baltimore  and  Ohio  shared  this  Reading  interest 
with  the  Lake  Shore  of  the  New  York  Central 
system.    The  New  York  Central  and  the  Pennsyl- 
vania  acquired  a  working  control  of  the  same  kind 
in  the  Chesapeake  and  Ohio  Railway,  which  was 
an  important  element  in  the  soft  coal  fields  and 
was  reaching  out  to  grasp  soft  coal  properties  in 
Ohio  and  Indiana. 

These  and  other  purchases,  and  the  consequent 
voice  acquired  in  the  management,  established  com- 
parative harmony  among  Eastern  railroads  for  a 
long  time;  they  stabilized  rates  and  enabled  for- 
merly competing  roads  to  parcel  out  territory 
equitably  among  the  different  interests.  Later, 
Harriman,  and  to  some  extent  Morgan,  carried  the 
community  of  interest  idea  some  steps  further. 


THE  NEW  YORK  CENTRAL  45 

Morgan  caused  the  New  York  Central  to  acquire 
stock  interests  in  certain  "feeder"  lines  such  as 
the  New  York,  New  Haven  and  Hartford  and  the 
Chicago,  Milwaukee  and  St.  Paul,  as  well  as  in 
wmpeting  lines;  and  Harriman  caused  the  Union 
Pacific  not  only  to  dominate  the  Southern  Pacific 
Company  by  minority  control  but  also  to  acquire 
interests  in  the  Illinois  Central,  the  Baltimore  and 
Ohio,  the  New  York  Central,  and  other  eastern 
properties.    The  fact  was  that  Harriman  had  plans 
in  view  for  acquiring  actual  control  of  the  New 
York   Central  for  the  Union   Pacific  and   thus, 
with  the  Illinois  Central,  of  creating  a  continuous 
transcontinental  line  from  ocean  to  ocean. 

In  the  past  decade  few  unusual  or   startling 
events  have  marked  the  history  of  the  Vanderbilt 
lines.    The  Vanderbilt  family  no  longer  possesses 
a  majority  interest  in  the  stock,  or  anything  which 
approaches  it,  and  the  New  York  Central  system 
and  its  subsidiaries  have  come  to  be  known  more 
and  more  as  Morgan  properties.    The  system  has 
grown  up  with  the  country.     Many  of  its  former 
controlled  roads  have  now  been  merged  into  the 
main  corporation  and  many  new  lines  have  been 
added  to  it.    Hundreds  of  millions  of  dollars  of  new 
capital  have  been  spent  on  the  main  lines  and 


i  I 


46  THE  RAILROAD  BUILDERS 

terminals  since  1900.   In  1919  the  entire  property, 
including  controlled   lines,  embraced  more  than 
13,000  miles  of  main  track,  besides  about  5000 
miles  of  extra  tracks;  over  200,000  freight  cars  are 
in  use  on  the  system,  and  every  year  upwards  of 
200,000,000  tons  of  freight  are  transported.     The 
gross  annual  revenues  of  the  entire  system  now 
aggregate  more  than  $400,000,000,  while  the  total 
capitalization  in  stocks  and  bonds  exceeds  a  billion 
dollars.     It  is  indeed  a  far  cry  from  that  day  in 
August,  1831,  when  the  De  Witt  Clinton  locomotive 
made  its  trial  trip  over  the  primitive  rails  of  the 
seventeen-mile  Mohawk  and  Hudson  road  —  a  far 
cry  even  from  that  other  day,  thirty-eight  years 
later,    when  the   sagacious    Commodore  startled 
the  financial  world  by  his  New  York  Central  and 
Hudson  River  Railroad,  with  a  capital  of  ninety 
million  dollars. 


CHAPTER  III 

THE  GREAT   PENNSYLVANIA  SYSTEM 

In  the  early  forties  the  commercial  importance 
of  Philadelphia  was  menaced  from  two  directions. 
A  steadily  increasing  volume  of  trade  was  passing 
through  the  Erie  Canal  from  the  Central  West  to 
the  northern  seaboard,  while  traffic  over  the  new 
Baltimore  and  Ohio  Railroad  promised  a  great 
commercial  future  to  the  rival  city  of  Baltimore. 
With  commendable  enterprise  the  Baltimore  and 
Ohio  Company  was  even  then  reaching  out  for  con- 
nections with  Pittsburgh  in  the  hope  of  diverting 
western  trade  from  eastern  Pennsylvania.    More- 
over the  financial  prestige  of  Philadelphia  had  suf- 
fered from  recent  events.     The  panic  of  1837,  the 
contest  of  the  United  States  Bank  with  President 
Jackson,  its  defeat,  and  its  subsequent  failure  as  a 
state  bank,  the  consequent  distress  in  local  finan- 
cial circles  —  all  conspired  to  shift  the  monetary 
center  of  the  country  to  New  York. 

47 


f     ^1 


*8  THE  RAILROAD  BUILDERS 

It  was  at  this  time  that  Philadelphia  capitalists 
began  to  bestir  themselves  in  an  attempt  to  recover 
their  lost  opportunities.    Philadelphia  must  share 
m  this  trade  with  the  Central  West.    The  designs 
of  the  Baltimore  and  Ohio  Company  must  be  de- 
feated by  bringing  Pittsburgh  into  contact  with 
Its  natural  Eastern  market.   To  this  end,  the  Penn- 
sylvania Railroad  was  incorporated  on  April  13 
1846,  with  a  franchise  permitting  the  construction' 
of  a  railroad  across  the  State  from  Harrisburg  to 
Pittsburgh.     An  added  incentive  to  constructive 
expansion  was  given  by  an  act  of  the  Legislature 
authorizing  the  Baltimore  and  Ohio  to  extend  its 
line  to  Pittsburgh  if  the  Pennsylvania  Company 
failed  to  avail  itself  of  its  franchise. 

In  order  to  avoid  the  heavy  cost  of  constructing 

a  road  between  Philadelphia  and  Harrisburg,  the 

Pennsylvania  Railroad  entered  into  arrangements 

with  the  Philadelphia  and  Columbia  -  a  railroad 

opened  in  1834  and  owned  by  the  State  -  which 

ran  through  Chester  and  Lancaster  to  Columbia. 

This  road  was  primitive  in  the  extreme  and  used 

both  steam  and  horse  power.    As  late  as  1842  a 

train  was  started  only  when  sufficient  traffic  was 

waiting  along  the  road   to   warrant  the  use   of 

the  engine.     Belated  trains  were  hunted  up  by 


THE  GREAT  PENNSYLVANU  SYSTEM    40 

horsemen.  Yet  the  road  was  in  those  days  famous 
for  the  "rapidity  and  exceptional  comforts  of  the 
train  service."  Between  Columbia  and  Harris- 
burg  passengers  westward  bound  had  to  use  the 
Pennsylvania  Canal. 

Construction  of  the  main  line  westward  to  Pitts- 
burgh began  at  once  and  progressed  rapidly.    By 
making  use  of  the  Alleghany  Portage  Railroad 
from  Hollidaysburg,  the  Pennsylvania   Railroad 
eventually  secured  a  continuous  line  from  Harris- 
burg  to  Pittsburgh.     But  between  Philadelphia 
and  Harrisburg  passengers  were  for  a  long  time 
subjected  to   many  inconveniences.     Finally  in 
1857  the  Pennsylvania  Railroad  bought  the  Phila- 
delphia and  Columbia  from  the  State,  rebuilt  it, 
and  extended  it  to  Harrisburg.    At  the  same  time 
the  Pennsylvania  bought  the  main  line  of  the  Pub- 
lic Works,  which  included  the  Alleghany  Portage 
Railroad.     On  July  18,   1858,  the  first  through 
train  passed  over  the  entire  line  from  Philadelphia 
via  Mount  Joy  to  Pittsburgh  without  transfer  of 
passengers.    At  the  same  time  the  first  smoking 
car  ever  attached  to  a  passenger  train  was  used, 
and  sleeping  cars  also  soon  began  to  appear. 

The  railroad  genius  identified  with  the  history 
of  the  Pennsylvania  Railroad  during  the  foUowing 


«>  THE  aULROAD  BUILDERS 

decade  is  J.  Edgar  Thomson.    A  man  of  vision 
and  of  great  shrewdness  and  abihty,  he  was  more 
hke  the  modern  railroad  head  of  the  Ripley  or  Un- 
derwood type  than  of  the  Vanderbilt.  Garrett,  or 
Drew  type.    His  interest  was  never  in  the  stock 
market  nor  in  the  speculative  side  of  railroading 
but  was  concentrated  entirely  on  the  development 
and  operation  of  the  Pennsylvania  Railroad  sys- 
tem.     His  dreams  were  not  of  millions  quickly 
made  nor  of  railroad  dominance  simply  for  the 
power  that  it  gave;  his  mind  was  concentrated  on 
the  growth  and  prosperity  of  a  vast  railroad  sys- 
tem which  would  increase  with  the  years,  become 
lucrative  in  its  operations,  and  not  only  radiate 
throughout  the  State  of  Pennsylvania  but  extend 
far  beyond  into  the  growing  West. 

Under  the  Thomson  management,  which  lasted 
untU  1874,  the  record  of  the  Pennsylvania  Rail- 
road  was  one  of  progress  in  every  sense  of  the  word. 
While  Daniel  Drew  was  hning  his  pockets  with 
loot  from  the  Erie  Railroad  and  Commodore  Van- 
derbilt  was  pihng  up  his  colossal  fortune  through 
consohdation  and  manipulation,  J.  Edgar  Thom- 
son was  steadily  building  up  the  greatest  business 
orgamzation  on  the  continent.  In  1860,  the  entire 
Pennsylvania  Railroad  system   was  represented 


THE  GREAT  PEXNSVXVANIA  SYSTEM  SI 
n.er.Jy  by  the  main  line  from  Philadelphia  to  RtU- 
burgh  with  a  few  .hort  branches.  By  1889  the 
road  had  expanded  within  Pennsylvania  alone  to 
near^-  one  thousand  miles  and  also  controlled  lines 
northward  to  the  shores  of  Lake  Erie,  through  the 
State  of  New  York. 

But  the  master  accomplishment  of  the  Thomson 
administration  was  the  acquisition  of  the  Pitta- 
burgh,  Fort  Wayne  and  Chicago  line  in   1869. 
Th,s  new  addition  gave  the  Company  its  own 
~nnect.on  w,th  Chicago  and  made  a  continuom 
jstem  from  the  bank,  of  the  Delaware  at  Phila- 
delphia to  the  shores  of  Lake  Michigan,   thus 
nvahng  the  far-flung  Vanderbilt  line,  a  thousand 
miles  long,  which  the  industrious  Commodore  was 
now  o^aniring.     Shortly  thereafter  the  Pennsyl- 
vania began  to  expand  on  the  east  also  and  -b- 
ained  -  e„try  into  New  York  City  by  acquiring 
.he  United  Railroad  and  Canal  Company,  which 
owned  mes  across  the  State  of  New  Jersey,  passing 
through  Trenton.  * 

In  the  latter  years  of  the  Thomson  management 
•t  became  more  and  more  evident  that  it  was  im- 

LT\v".  ""  ^--y'-"™"  Railroad  to  have 
further  fl  estern  connections  which  would  reach  the 
growing  cities  of  the  Middle  West.     While  the 


M  THE  RAILROAD  BUILDERS 

Fort  Wayne  route  made  a  very  direct  eonnectioi, 
with  Chicago  and  included  branches  of  value  yet 
the  keen  competition   which   was  developing  in 
the  expansive  years  following  the  Civil  War  made 
actual  control  of  the  Middle  Western  territory  a 
matter  of  sound  business  policy.    The  Vanderbilt 
hues  were  reaching  out  through  Ohio,  Indiana 
and  Illinois;  the  Baltimore  and  Ohio  was  steadily 
developing  its  Western  connections,  and  now  Jay 
Gould  had  come  actively  on  the  scene  with  large 
projects  for  th..  Erie.     To  offset  these  projects, 
early  in  1870  a  "holding  company "- probably 
the  first  of  its  kind  on  record  -  known  as  the  Penn^ 
sylvania  Company  was  formed  for  the  express  pur- 
pose of  controlling  and  managing,  in  the  inter- 
est  of  the  Pennsylvania  Railroad,  all  lines  leased 
or  controlled   or  in   the   future  to   be  acquired 
by  the  Pennsylvania  Railroad  interests  west  of 
Pittsburgh  and  Erie.     This  Companv  took  over 
the  lease  of  the  Fort  Wayne  route  and  also  ac- 
quired control  by  lease  of  the  Erie  and  Pitts- 
burgh, a  road  extending  northward  through  Ohio 
to  Lake  Erie. 

After  this  date  the  expansion  of  the  system  west 
of  Pittsburgh  went  on  rapidly.  In  1871  the  Cleve- 
land and  Pittsburgh  Railroad,  which  had  been 


THE  GREAT  PENNSYLVANU  SYSTEM    SS 
opened  as  early  as  185«,  came  under  the  Pennsyl- 
vanm  control.    Soon  after  this,  many  smaller  line, 
m  Ohio  were  merged  in  the  system.    The  most  im- 
portant acquisition  during  this  period,  however, 
was  the  result  of  the  purchase  of  the  great  lines 
ex  endmg  westward  from  Pittsburgh  to  St.  Louis, 
>v.th  branches  reaching  southward  to  Cincinnati 
and  northward  to  Chicago.     This  system  -  then 
known  as  the  "Pan  Handle"  route  and  later  as  the 
P'tUburgh.  Cmcmnati.  Chicago  and  St.  Louis - 
>vas  a  consolidation  of  several  independent  prop- 
ert.es  of  .mportance  which  had  been  graduallv  ex- 
tendmg  themselves  over  this  territory  during  the 

prev,ousdecade.  This  newsystem,  which  embraced 
ov^er  fourteen  hundred  miles  of  road,  gave  the  Penn- 
^ylvanm  a  second  line  to  Chicago,  a  direct  line  to 
^t.  Louis,  a  second  line  to  Cincinnati,  and  ac-cess  to 
tcmtory  not  previously  tapped. 

hI*""',  r"  ""'"■"•^"'^"'^  of  the  Pennsylvania 
Ka.lroad  Company  during  these  yea,,  of  consoli- 
dafon  and  expansion  are  not  to  be  compared  with 
hose  of  more  modern  times,  it  is  well  to  realize 
tl.at  even  as  early  as  the  seventh  decade  of  the  last 
century  th.s  railroad  was  always  in  the  forefront  in 
matters  of  high  standards  and  progressive  practice. 
It  was  the  pioneer  in  most  of  the  improvements 


54  THE  RAILROAD  BUILDERS 

which  were  later  adopted  by  other  roads.  The 
Pennsylvania  was  the  first  American  railroad  to 
lay  steel  rails  and  the  first  to  lay  Bessemer  rails; 
it  was  the  first  to  put  the  steel  fire-box  under  the 
locomotive  boiler;  it  was  the  first  to  use  the  air 
brake  and  the  block  signal  system;  it  was  the  first 
to  use  in  its  shops  the  overhead  crane. 

In  these  earlier  years  also  the  Pennsylvania  had 
established  its  enviable  record  for  conservative 
and  non-speculative  management.     No  railroad 
wrecker  or  stock  speculator  had  ever  had  anything 
to  do  with  the  financial  control  of  the  company, 
and  this  tradition  has  been  passed  on  from  decade 
to  decade.    The  stockholders  themselves,  even  in 
those  days  of  loose  methods  and  careless  finance, 
had  the  dominating  voice  in  the  affairs  of  the  com- 
pany and  were  also  factors  in  the  approval  or  disap- 
proval of  any  proposed  policies.    In  the  matter  of 
its  finances  the  Pennsylvania  developed  and  estab- 
lished an  equally   clean    record.     The   company 
began  almost  at  the  beginning  to  pay  a  satisfac- 
tory dividend  on  its  shares  and  continued  to  do 
so  right  through  the  Civil  War  period.    Since  the 
through  line  from  Philadelphia  to  Pittsburgh  was 
ope.ied,   not  a  single  year   has  passed   without 
the  payment  of  a  dividend  —  a  sixty-year  record 


THE  GREAT  PENNSYXVAN.  .  .    STEM    M 

.Wch  can  be  duplicated  by  no  other  Americn 

railroad  system. 

The  Pennsylvania  still  continued  to  forge  ahead 
even  during  the  exciting  period  from  1877  to  about 
1889,  when  the  trunk  lines  were  aggressively  car- 
r.v.ng  on  that  policy  of  cutthroat  competition  be- 
tneen  Chicago  and  the  Atlantic  seaboard  which 
resulted  m  so  severely  weakening  the  credit  and 
position  of  properties  like  the  Baltimore  and  Ohio 
and  the  Erie.     The  Pennsylvania,  too.  indulged 
m  rate  cutting,  but  the  management  was  equal  to 
the  situation  and  made  up  in  other  directions  what 
•t  lost  in  lower  rates.     It  gave  superior  service, 
developed  a  high  efficiency  of  operation,  and  stead- 
•ly  maintained  its  properties  at  a  high  standard. 
I>uring  these  years  the  president  was  George  B 
Roberts,   who  had   succeeded   Thomas  A.   Scott 
m  1880. 

Roberts's  management  spanned  the  period  from 
1880  to  1897  and  embraced  a  decade  of  compara- 
tive prosperity  for  the  country  as  a  whole  and 
nearly  a  decade  of  panic  and  industrial  and  fi- 
nancial  depression.  During  the  eariier  decade  the 
business  of  the  Pennsylvania  was  continually  bene- 
fited by  the  industrial  development  and  growth 
vrhich  marked  the  period.     It  was  at  this  time  that 


56  THE  RAILROAD  BUILDERS 

the  Pittsburgh  district  took  its  permanent  place 
as  the  great  center  of  steel  and  iron  manufacture. 
l.:  discovery  of  petroleum  in  western  Pennsyl- 
vania, creating  an  enormous  new  industry  in  itself, 
proved  to  be  an  event  of  far-reaching  significance 
for  the  Pennsylvania  Railroad.  The  extensive  open- 
ing up  of  the  soft  coal  sections  of  western  Pennsyl- 
vania, Ohio,  and  Indiana,  also  meant  much  for  this 
great  system  of  railroads. 

Still  further  developments  in  other  directions  ac- 
crued to  the  benefit  of  the  Pennsylvania  Railroad. 
In  this  period,  by  obtaining  the  control  of  a  line 
to  Washington,  the  system  acquired  a  Southern 
artery   running   through    Wilmington,   Delaware, 
and  Baltimore  to  Washington.    Afterwards,  with 
other  roads,   the  Pennsylvania  acquired     ^ntrol 
of  the  Richmond,  Fredericksburg  and  Potomac 
Railroad  and  thus  obtained  a  line  to  Richmond, 
Virginia.    On  the  north  and  to  the  east  the  expand- 
ing movement  also  went  on.     In  addition  to  the 
development  of  its  main  line  from  Philadelphia 
to  Jersey  City,  the  Pennsylvania  acquired  many 
other  New  Jersey  lines,  including  the  West  Jersey 
and  Seashore,  a  road  running  from  Camden  to 
Atlantic  City  and  Cape  May. 

During  thewholeoftheaggressiveadministrationa 


THE  GREAT  PENNSYLVANIA  SYSTEM    57 
of  both  Thomas  A.  Scott  and  George  B.  Roberts 
the  great  system  continued  to  spread  out  steadily 
until  It  had  penetrated  as  far  as  Mackinaw  City 
on  the  north  and  Chesapeake  Bay  on  the  south 
Its  network  of  lines  stretched  across  the  Eastern 
section  of  the  continent  from  New  York  to  Iowa 
and  Missouri,  while  the  intensive  development  of 
shorter  lines  in  the  State  of  Pennsylvania  and  to 
the  north  was  unceasing.    The  Northern  Central 
runmng  south  from  Sodus  Bay  on  Lake  Ontario 
through  central  Pennsylvania  to  Baltimore,  the 
Buffalo  and  Allegheny  Valley  extending  from  Oil 
City  northward  and  joining  the  main  system  to  the 
east,  the  Western  New  York  and  Pennsyl  vama  oper- 
ating  north  from  Oil  City  to  Buffalo  rnd  Rochester 
-  these  lines  the  Pennsylvania  Railroad  acquired 
md  definitely  consolidated  in  the  Roberts  regime 
After  the  retirement  of  Roberts,  Frank  Thom- 
son, who  had   formerly   been  general  manager 
was  placed  at  the  head  of  the  system  for  three' 
years.    But  in  1899  Alexander  J.  Cassatt,  who  had 
for  many  years  been  identified  with  the  Pennsyl- 
vama  as  officer,  director,  and  stockholder,  took  the 
helm,  and  a  new  chapter  and  probably  the  greatest 
«n  the  history  of  this  remarkable  railroad  began 
The  name  of  Alexander  J.  Cassatt  will  always 


58  THE  RAILROAD  BUILDERS 

be  linked  with  the  comprehensive  terminal  de- 
velopments  in  the  region  of  New  York  City  which 
were  begun  almost  immediately  on  his  accession  to 
the  presidency  and  which  were  carried  forward  oxi 
bold  and  far-reaching  lines.    Perhaps  more  than 
any  other  one  person,  Cassatt  foresaw  the  ap- 
proach of  the  day  when  .^ew  York  City  as  a  com- 
mercial  center  would  outstrip  both  in  density  of 
population  and  in  amount  of  wealth  all  the  other 
cities  of  the  worid.    He  and  his  predecessors  had 
for  many  years  witnessed  the  great  industrial  de- 
velopment of  the  Pittsburgh  district,  where  prop- 
erty values  had  grown  by  leaps  and  bounds  and 
where  the  steadily  advancing  development  of  in- 
dustry and  material  resources  had  been  so  unmis- 
takably reflected  in  the  increasing  earning  power 
and  value  of  the  Pennsylvania  Railroad  properties. 
But  while  at  Pittsburgh  the  road  had  every- 
thing to  favor  it  as  far  as  tei-minals  and  rights  of 
way  through  the  heart  of  the  great  industrial  dis- 
trict  were  concerned,  in  the  great  Eastern  metropo- 
lis the  Pennsylvania  Railroad  was  at  an  obvious 
disadvantage,  particulariy  as  compared  with  the 
New  York  Central,  which  had  its  splendid  ter- 
minal rights  penetrating  to  the  heart  of  the  city. 
Cassatt  saw  that  his  company  must  without  delay 


THE  GREAT  PENNSYLVANU  SYSTEM  5» 
take  a  number  of  bold  and.  for  the  time,  enor- 
mously  expensive  steps  toward  the  development 
of  terminal  facilities  in  Greater  New  York  or  else 
forever  abandon  the  idea  of  getting  nearer  the 
heart  of  the  city  than  the  New  Jersey  shore  and 
thus  run  the  risk,  in  the  keen  contest  for  commer- 
cial supremacy,  of  ultimately  falHng  behind  other 
more  advantageously  situated  lines. 

There  were  still  further  incentives  to  immediate 
action  on  the  part  of  the  Pennsylvania  Railroad. 
While  the  New  Yo,k  Central  was  in  an  ideal  posi^ 
tion  for  handling  all  traflSc  destined  for  the  New 
England  States,  the  Pennsylvania  could  control 
practically  none  of  this  business,  as  its  terminals 
were  on  the  wrong  side  of  the  Hudson  and  necessi- 
tated not  merely  the  inconvenient  transfer  of  pas- 
sengers but  also  the  much  more  expensive  hai>- 
dling  of  freight.    Other  disadvantages  from  which 
the  Pennsylvania  suffered  were  involved  in  its 
inability  to  make  the  most  economical  terms  for 
foreign  shipping,  as  a  large  proportion  of  such 
freight  had  to  be  constantly  transferred  on  lighters 
to  the  New  York  and  Brooklyn  sides  of  the  harbor. 
Thus  any  comprehensive  plan  for  terminal  de- 
velopment on  the  part  of  the  Pennsylvania  must 
necessarily  include  not  only  a  tunnel  system  into 


«0  THE  RAILROAD  BUILDERS 

New  York  City  but  also  an  outlet  through  the 
^ity  to  Long  Island  and  a  connection  with  the 
New  England  railroads. 

The  first  move  in  the  development  of  this  ter- 
mnial  system  was  the  acquisition  in  1900  of  the 
control  of  the  Long  Island  Railroad,  embracing 
all  the  steam  railway  mileage  on  Long  Island, 
with  hues  extending  a'    ^g  both  the  north  and 
south  shores  to  MontauK  Point.    This  acquisition 
added  extensive  freight  yards  and  terminals  on 
the  Brooklyn  side  of  the  East  River.    The  Com- 
pany then  obteined  franchises  and  began  the  con- 
struction of  its  great  tunnels  under  the  North  and 
East  Rivers  and  entirely  across  New  York  City 
with  a  mammoth  passenger  st.tion  at  Seventh 
Avenue  and  Thirty-second  Street.     A  great  rail- 
road  bndge  was  planned  to  cross  from  Long  Island 
to  the  mainland,  connecting  with  the  New  York 
New  Haven  and  Hartford  system,  in  the  stock  of 
which  the  Pennsylvania  at  this  time  purchased 
an  mterest. 

The  terminal  construction  occupied  a  period 
of  many  years  and  cost  over  one  hundred  milhon 
dollars,  besides  the  added  costs  involved  in  build- 
ing up  and  developing  the  old,  worn-out  Long  Is- 
land  Railroad.     Only   recently  has    the  project 


THE  GREAT  PENNSYLVANU  SYSTEM    61 
been  rounded  out  and  completed  through  the  final 
construction  of  the  important  connection  with  the 
New  England  railroad  systems.    But  the  reali- 
zation of  this  plan  is  undoubtedly  the  greatest 
achievement  in  all  the  long  career  of  the  Pennsyl- 
vania  Railroad.    Had  the  project  been  delayed  for 
another  decade,  it  probably  could  not  have  been 
accomplished  because  of  the  growing  expense  of 
operation    and    the    difficulties    of  getting   fran- 
chise rights  and  rights  of  way  through  and  under 
the  metropolis. 

While  the  tunnel  development  is  the  notable 
achievement  of  the  Cassatt  i^gime.  this  remark- 
able man's  name  is  also  closely  identified  with  the 
"community  of  interest"  idea  already  explained. 
This  "community  of  interest"  scheme  was  pushed 
aggressively  by  Cassatt  in  cooperation  with  Harri- 
man.  Hill,  and  Morgan.     Large  stock  purchases 
were  made  in  the  Norfolk  and  Western,  the  Chesa- 
peake and  Ohio,  and  the  Baltimore  and  Ohio.     As 
the  latter  road  had  in  its  turn  acquired,  jointly  with 
New  York  Central  interests,  a  working  control  of 
the  Reading  Company,  and  the  Reading  Company 
had  secured  majority  ownership  of  the  New  Jersey 
C'  ntral  system,  it  is  apparent  that  the  domination 
which  the  Pennsylvama  had  obtained  over  the 


6«  THE  RAILR0.4D  BUILDERS 

entire  Eastern  seaboard  south  of  New  York  City 
and  north  of  Baltimore  was  made  nearly  complete. 
The  "community  of  interest"  plan  held  sway 
with  the  large  railroads  of  the  country  and  was  very 
effective  for  perhaps  half  a  dozen  years,  until  the 
mterstate  commerce  laws  were  amended  in  such 
a  way  as  to  give  the  Government  complete  control 
over  railroad  freight  and  passenger  rates.    In  1906 
the  Pennsylvania  began  to  dispose  of  the  bulk  of 
Its  holdings  in  competing  properties,  the  most  no- 
table transactions  being  the  sale  of  its  entire  inter- 
est in  the  Chesapeake  and  Ohio  to  independent 
interests  and  a  substantial  part  of  its  Baltimore 
and  Ohio  holdings  to  the  Union  Pacific  Railroad. 
A  few  years  later,  when  the  Union  Pacific  was 
forced  by  the  Federal  courts  to  dispose  of  its  con- 
trol of  the  Southern  Pacific  Company,  a  trade  was 
made  between  the  Pennsylvania  and  the  Union 
Pacific  whereby  the  latter  took  from  the  Penn- 
sylvania the  remainder  of  its  Baltimore  and  Ohio 
investment  and  gave  in  exchange  a  portion  of  its 
own  large  holding  of  Southern  Pacific  stock. 

To  get  a  fair  idea  of  the  meaning  and  magnitude 
of  the  great  Pennsylvania  Railroad  system  today 
one  must  do  more  than  scan  maps  and  study 
statistics.    One  should  travel  by  daylight  over  its 


THE  GREAT  PENNSYLVANIA  SYSTEM    63 
main  line  from  New  York   to  Pittsburgh.     AI. 
though  the  route  is  over  the  same  ground  which  the 
road  followed  a  generation  or  two  ago,  a  four-track 
line  runs  practically  all  the  way,  with  long  stretches 
of  hundreds  of  miles  of  five,  six,  and  eight  tracks. 
Where  mountains  were  climbed  thirty  years  ago, 
one  will  now  find  them  bored  by  tunnels;  where 
sharp  curves  were  necessary  before  straight  track- 
age only  will  be  encountered  today.     Grades  have 
been  eliminated  everywhere  and  the  whole  route  has 
been  modernized  and  strengthened  by  the  laying  of 
one  hundred  to  one  hundred  and  fifty  pound  rails. 
Undoubtedly  the  fortunate  location  of  the  Penn- 
sylvania lines   in    the   half   dozen   Stales    which 
represent  the  financial  and  industrial  heart  of  the 
continent  has  had  much  to  do  with  its  vast  growth 
and  the  expansion  of  its  business;  but  its  high  repu- 
tation can  be  explained  only  by  the  long  record 
of  its  superior  methods  and  management.    One 
of  the  primary  objects  of  Pennsylvania  Railroad 
policy  has  been  to  keep  pace  with  the  growth  of 
the  country.    Instead  of  following  in  the  wake  of  in- 
dustrial  progress  and  making  its  improvements  and 
extensions  after  its  competitors  had  made  theirs, 
its  management  has  usually  had  the  foresight  to 
prepare  well  in  advance  for  future  needs. 


CHAPTER  IV 


THE    ERIE    RAILROAD 

Before  introducing  a  friend  to  a  distinguished  stranger. 
It  IS  advisable  to  give  him  some  account  of  the  person 
whose  acquaintance  he  is  about  to  make;  and  so,  fellow- 
traveler,  whom  I  introduce  to  the  New  York  and  Erie 
Railroad,  it  may  be  well  to  prefix  here  a  brief  sketch  of 
the  history  and  present  condition  of  this,  the  Lion  of 
Railways.     True,  he  is  yet  in  an  unfinished  state  but 
you  will  find  that  what  there  is  of  him  is  complete,  and 
of  wondrous  organization  and  activity.   His  magnificent 
head  and  front  repose  in  grandeur  on  the  shores  of  the 
Hudson;  his  iron  lungs  puff  vigorously  among  the  High- 
land fastnesses  of  Rockland;  his  capacious  maw  fares 
sumptuously  on  the  dairies  of  Orange  and  the  game  and 
cattle  of  Broome;  his  lumbar  region  is  built  upon  the 
timber  of  Chemung,  and  the  tuft  of  his  royal  extremity 
floats  triumphantly  on  the  waters  of  Lake  Erie. 

This  exultant,  characteristically  American,  de- 
scription appeared  in  Harper's  Guide-Book  of  the 
New  York  and  Erie  Railroad,  published  in  1851, 
soon  after  the  opening  of  the  main  Une  of  more  than 

64 


THE  ERIE  RAILROAD  95 

four  hundred  and  sixty  miles  from  Piermont  on  the 
Hudson  to  Dunkirk  on  I^ke  Erie.  That  this  rail- 
road, which  after  nearly  twenty  years  of  struggle 
and  of  financial  vicissitudes  had  finally  linked  the 
Great  Lakes  with  the  Atlantic  coast,  was  looked 
upon  as  a  property  of  wonderful  character  and 
limitless  future  is  indicated  in  all  the  railroad  litera- 
ture of  that  time.  Appleton's  Illustrated  Hand- 
hook  of  American  Travel,  published  in  1857,  devotes 
several  pages  to  a  description  of  this  remarkable 
achievement  in  railroad  extension  and  among  other 
things  says: 

This  great  route  claims  a  special  admiration  for  the 
grandeur  of  the  enterprise  which  conceived  and  executed 
it,  for  the  vast  contribution  it  has  made  to  the  facilities 
of  travel,  and  for  the  multiplied  and  various  landscape 
beauties  which  it  has  made  so  readily  and  pleasantly 
accessible.     It  traverses  the  southern  portion  of  the 
Empire  State  in  its  entire  length  from  east  to  west, 
passing  through  countless  towns  and   villages,  over 
many  rivers,  through  rugged  mounUin  passes  now,  and 
anon  amidst  broad  and  fertile  valleys  and  plains.    In 
addition  it  has  many  branches,  connecting  its  stations 
with  other  routes  in  all  directions,  and  opening  new 
stores  of  pictorial  pleasures.  ...    An  interesting  fea- 
ture of  this  road  is  its  own  telegraph,  which  runs  by  the 
side  of  the  road  and  has  its  operator  in  nearly  every  sta- 
tion house.    This  telegraph  has  a  double  wire,  enabling 
the  company  to  transact  the  public,  as  well  as  their 


^  THE  RAILROAD  BUm)ERS 

uane  street,  morninR,  noon,  and  nisht. 

f  h Jf''  ^™  *"'"«''  »y»t«"  w«s  foreshadowed  in 
the  t.™e  of  Queen  Anne,  when  the  Colony  of  New 

to  John  Smith  and  other  pe«on,  for  the  p„rpo« 
o   con.trnet,n«  a  publie  road  eonneeting  Z^ 

-  the  ;:^„  jr.-'-rr ;rt 

benefie-ane,  should  have  eonstructed  a  Ld  Hde 
^-ou^h  for  two  earriages  to  pa.,  f„„  Nyack  o^ 
the  Hud»n  River  to  Sterling  Iron  Works,  a  di.- 
tanee  of  about  thirty  miles;  and  that  they  shouTd 

ra«rtht''''".'"°'*-'-«'«'trailtr 
to  allow  the  eamages  to  pass.    In  this  way  began 

New  York,  wh,eh  after  the  lapse  of  more  than  a 
een tu  „,„Hed  in  opening  the  Erie  Cana,  nd  in 
P^jeetmg  a  railroad  system  connecting  New  Yo  k 
and   he  valley  of  the  Hudson  with  Je  Erie 

After  the  opening  of  the  Erie  Canal  in  XBiS  the 
Legislature  of  New  York  dir^ted  a  surve^'o^^ 
state  road  which  wa.,  to  be  constructed  at  public 
expense  thi^ugh  the  southern  tier  of  counties  ^^m 


THE  ERIE  RAILROAD  07 

the  Hudson  River  to  Uke  Erie.    The  unfavorable ' 
profile  exhibited  in  the  survey  apparenUy  cauaed 
the  project  to  be  abandoned.     But  the  idea  still 
held  sway  over  the  minds  of  many  people;  and 
the  great  benefits  brought  to  the  Mohawk  Valley 
and  surrounding  country  by  the  Erie  Canal  led 
the  southern  counties  to  demand  a  transportation 
route  which  would  work  similar  wonders  in  that 
region.    This  growing  sentiment  finally  persuaded 
the  Legislature  to  charter  in  April,  1832,  the  New 
York  and  Erie  Railroad  Company,  and  to  give  it 
authority  to  construct  a  line  and  to  regulate  its 
own  charges  for  transportation. 

During  the  following  summer  a  survey  of  the 
route  was  made  by  Colonel  De  Witt  Clinton,  Jr., 
and  in  1834  a  second  survey  was  made  of  the  whole 
of  the  proposed  route.     When  the  probable  cost 
was  estimated,  many  opponents  arose  who  de- 
claimed the  undertaking  was  "chimerical,  imprac- 
tical, and  useless."    The  road,  they  declared,  could 
never  be  built  and,  if  built,  would  never  be  used- 
the  southern  counties  were  mountainous,  sterile' 
and  worthless,  and  afforded  no  products  requiring 
a  market;  and,  in  any  case,  these  counties  should 
find  their  natural  outlet  in  the  valley  of  the  Mo- 
hawk.  This  antagonism  was  successfully  opposed. 


««  THE  RAILROAD  BUILDERS 

however,  and  the  construction  of  the  road  waa 
begun  in  1836. 

The  panic  of  1837  interfered  with  the  work,  but 
in  1838  the  state  Legislature  came  forward  with  a 
construction  loan  of  three  million  dollars,  and  the 
first  section  of  line,  extending  from  Piermont  on 
the  Hudson     d  Goshen,  was  put  into  operation 
in  September,   1841.    In  the  following  year  the 
<  ompany  became  financially  embarrassed  and  was 
placed  in  the  hands  of  receivers.    This  catastrophe 
delayed  further  progress  for  years,  and  it  was  not 
until  1846  that  sufficient  new  capital  was  raised  to 
go  on  with  the  work.    The  original  estimate  of  the 
cost  for  building  the  entire  line  of  485  miles  had 
been  three  million  dollars,  but  already  the  road  had 
cost  over  six  millions  and  only  a  small  portion 
had  been  finished.     The  final  estimate  now  rose  to 
fifteen  millions,  and,  although  some  money  was 
raised  from  time  to  time  ard  new  sections  were 
built,  there  was  no  certainty  ibat  tiie  entire  road 
would  ever  be  completed.     Ultimately  the  State 
of  New  York  canceled  its  claim  against  the  prop- 
erty, new  subscriptions  of  some  millions  were  se- 
cured, and  more  money  was  raised  by  mortgaging 
the  finished  sections. 
FinaUy.  in  1851,  after  eighteen  years  of  effort. 


THE  ERIE  RAILROAD  69 

the  line  was  opened  to  Lake  Erie.  In  addition 
there  had  been  added  various  feeders  or  branches, 
giving  the  road  an  entry  into  Scranton.  Pennsyl* 
vania.  and  into  Geneva  and  Buffalo,  New  York. 
It  had  its  terminus  on  Lake  Erie  at  Dunkirk  and 
its  eastern  terminus  at  Piermont,  near  Nyack  on 
the  Hudson,  about  twenty-five  miles  by  boat  from 
New  York  City. 

The  financial  condition  of  the  Erie  at  this  time 
manifested  the  beginning  of  that  general  policy 
of  improvide  ice  and  recklessness  which  afterward, 
for  neariy  a  generation  and  a  half,  made  the  com- 
pany a  speculative  football  in  some  of  the  most  dis- 
reputable games  of  Wall  Street  stock-jobbers.    For 
though  the  original  estiir  ite  had  been  three  mil- 
lions and  the  highest  estimate  of  the  cost  during 
construction  had  been  fifteen  million  dollars,  the 
company,  in  1851.  started  its  career  with  capital 
obligations  of  no  less  than  twenty-six  millions  — 
a  very  large  sum  for  those  days. 

The  fact  that  these  initial  obligations  constituted 
a  heavy  burden  became  apparent  when  the  Erie  be- 
gan operations.  They  made  necessary  such  high 
freight  rates  that  shippers  held  indignation  meet- 
ings and  again  and  again  made  appeals  for  legis- 
lative relief.     Although  much  money  had  been 


70  THE  RAILROAD  BUILDERS 

raised  after  1849  for  improvements,  the  condition 
of  the  Erie  steadily  grew  worse.  It  soon  became 
notorious  for  many  accidents  due  to  carelessness 
in  running  trains  and  to  the  breaking  of  th  tittle 
iron  rails. 

But  in  spite  of  these  drawbacks  the  busino'.s  of 
the  Erie  grew.  In  1852  it  acquired  the  Ramapo 
and  Paterson  and  the  Paterson  and  Hudson  River 
railroails  und  in  this  way  it  obtained  a  more  di- 
rect connection  with  New  York  City.  It  changed 
the  tracks  of  its  new  railroads  to  the  six-foot 
gage,  which  the  Erie  had  adopted  from  the  start 
and  which  it  persisted  in  maintaining  for  many 
years  despite  the  world-wide  practice  of  estab- 
lishing,' a  standard  width  of  four  feet  eight  and 
one-half  inches. 

Tlie  most  conspicuous  figure  in  the  history  of 
the  Erie  Railroad  system  in  these  early  days  was 
Daniel  Drew.  From  1851,  when  the  main  line  was 
o[H'iu'<l.  until  1808,  this  man  was  a  director  and, 
for  the  larger  part  of  the  time,  treasurer.  Born  in 
1797,  he  had  driven  cattle  when  a  lioy  from  his 
native  town  of  Carmel  in  Putnam  County  to  the 
New  York  City  market  and,  for  some  years  later, 
he  ha<l  been  proprietor  of  the  Bull's  Head  Tavern. 
Shrewd,  unscrupulous,  illiterate,  good-natured,  and 


THE  ERIE  RAILROAD 


71 


sometimes  generous,  he  was  in  many  ways  unlike 
his  great  adversary  in  the  railroad  world.  Commo- 
dore V^anderbilt.  Drew  atfected  a  pious  and  sanc- 
timonious attitude  in  all  his  dealings,  while  Vander- 
bilt  had  a  more  frank  and  open  nature  and  usually 
made  no  pretensions  to  righteousness. 

For  many  years  following  1851,  Drew,  who 
owned  or  controlled  nearly  one-half  the  stock  of  the 
Erie,  appeared  to  think  that  his  office  of  treasurer 
carried  with  it  the  right  to  manipulate  the  stock 
of  the  road  at  any  time  it  might  help  his  pocket- 
hook  to  do  so.  He  frequently  advanced  money 
which  the  road  could  not  obtain  elsewhere,  always 
taking  full  security  ad  excessive  commissions. 
This  practice  gave  him  the  name  of  "specula- 
tive director,"  and  by  the  time  his  great  contests 
with  Commodore  Vanderbilt  broke  out,  he  was  re- 
puted to  be  worth  many  millions,  most  of  which 
lie  had  acquired  by  juggling  in  Wall  Street  with 
Erie  securities. 

The  entire  period  in  the  affairs  of  the  Erie  sys- 
tem from  the  ascendency  of  Daniel  Drew  in  1851 
to  the  end  of  the  Civil  War  witnessed  an  endless 
succession  of  stock-market  exploits  both  large  and 
small.  In  the  spring  of  1866,  however.  Drew  found 
an  opportunity  to  achieve  a  real  masterpiec-e  in 


7«  THE  RAILROAD  BUILDERS 

manipulation.  The  stock  of  the  Erie  road  was 
then  selling  at  about  95  and  the  company  was  in 
pressing  need  of  funds.  The  treasurer  came  to  the 
rescue  as  usual  and  made  the  necessary  advances 
on  adequate  security.  The  company  had  in  its 
treasury  a  considerable  amount  of  unissued  stock 
and  had  also  the  legal  right  to  issue  bonds  to  the 
extent  of  $3,000,000  which  could  be  converted 
into  stock.  Drew  took  these  bonds  and  the  un- 
issued stock  as  security  for  a  loan  of  $3,500,000. 

It  so  happened,  naturally,  that  Drew  was  soon 
heavily  short  of  Erie  stock  in  Wall  Street.  The 
market  was  buoyant;  speculation  was  rampant; 
and  the  outside  public,  the  delight  and  prey  of  Wall 
Street  gamblers,  were  as  usual  drawn  in  by  the 
fascination  of  acquiring  wealth  without  labor.  All 
this  time  our  friend,  Daniel  Drew,  was  quietly 
selling  Erie  stock  and  closing  contracts  for  the 
future  delivery  of  the  certificates;  and  he  was  do- 
ing this  at  rising  prices.  As  the  days  went  by,  his 
grave,  desponding  manner  grew  more  and  more 
apparent.  Erie  slock  continued  to  rise.  In  the 
loan  market  its  scarcity  became  greater  hour  by 
hour.  The  rumor  began  to  spread  that  "Uncle 
Daniel"  was  cornered.  His  large  obligations  for 
future  delivery  must  be  met.    Where  was  the  Erie 


THE  ERIE  RAILROAD  7S 

stock  to  come  from?  llie  stock  continued  to  soar, 
and  Treasurer  Drew  seemed  to  become  more  and 
more  depressed. 

Then  the  Mow  fell.  Drew  laid  his  hands  on  the 
?ollateral  which  he  held  for  his  loan  to  the  Erie. 
In  the  twinkling  of  un  eye  his  $.3,000,000  in  Erie 
bonds  was  converted  into  Erie  stock,  which  he 
proceeded  t*)  dump  in  Wall  Street.  Erie  quotations 
fell  from  90  to  50.  Every  on«'  at  last  realize*!  th«' 
tnip  but  not  before  Daniel  Drew  had  iM)cketed 
a  few  millions  in  profits. 

By  this  time  Drew  had  crome  to  be  looked  upon 
as  a  stock  operator  to  be  l>oth  admired  and  feared^ 
and  this  incident  took  its  place  in  Wall  Street  his- 
tory as  a  brilliant  t'oup  side  by  .side  with  Vander- 
bill's  Harlem  Railroad  and  other  celebrate*!  ex- 
ploits. It  was  soon  followed,  however,  by  much 
more  sen.sational  events.  WV  have  seen  that  the 
IK)rtentous  figure  of  Vanderbilt  was  just  at  this 
time  IcKiming  up  in  the  railroad  wt>rld,  and  Vander- 
bilt had  his  own  theory  of  the  management  and 
financing  of  railroads.  It  was  inevitable  that  he 
.should  clash  with  Drew.  He  was  a  few  years  older 
than  Drew,  and  the  two  men,  as  we  have  .seen, 
had  much  in  <'ommon.  Both  were  well  on  in  life 
before   they    had    transferred    their   activities    to 


P0^>   -3/'    .-•UK. 


UNF 


74  IHK  RAII.ROAI)  BUILDERS 

steam  railroads.  When  finally,  in  1868,  they 
crosswi  swords  in  connection  with  the  two  railroad 
systems  extending  through  New  York  State,  both 
were  morr  than  seventy  years  old  and  had  been 
successful  in  the  acquisition  of  millions  by  methods 
of  their  own  invention.  They  were  no  doubt 
equally  un.scrupulous,  but,  while  Drew  was  by  na- 
ture a  jiessiniist  and  ** bearish,"  Vanderbilt,  in  the 
Wall  Street  vernacular,  was  always  a  "bull." 

Having  obtained  control  <»f  the  New  York  Cen- 
tral, the  Hudson  River.  an<l  the  Harlem  railroads, 
Commo<lore  ^'anderbilt  now  <lecided  in  the  summer 
of  18(57  to  go  after  the  Erie,  of  which  Drew  was 
nominally  in  }>osses.sion,  although  no  one  knew 
when  h«'  owned  a  majority  of  the  stock  or  when  he 
was  lem})orarily  short  <»f  it.  Usually  he  loaded 
up  as  the  annual  elwtion  of  officers  approached 
and  li<iui<late<i  shortly  thereafter.  Resides  Van- 
tlerbilt  then-  was  another  interest  at  this  time 
trying  for  the  control  of  the  Erie.  This  interest 
consist e<l  <»f  certain  Wall  Street  speculators  and 
certain  Boston  (capitalists  who  proclaimetl  them- 
selves railroad  refornxers.  These  so-called  reform- 
ers were  as  unscrupulous  antl  crafty  as  either  of  the 
other  men,  and  they  really  represented  nothing  but 
an  attempt  to  raid  the  Erie  treasury  in  the  interest 


THE  ERIE  RAILROAD  75 

of  a  bankrupt  New  England  <orporation  known  as 
I  Im'  ^oston.  Hartford  and  Erie  Railroad.  As  was  well 

;    '  the  name  of  this  hitter  road  was  "synonymous 
.ith  bankruptcy,  litigation,  fraud,  and  failure." 

The  Erie  Railroad  control  was  always  nominally 
f«>r  sale,  and,  as  the  annual  election  approached,  a 
majority  of  stockholders  stood  ready  to  sell  their 
\  t>tes  to  the  highest  bidder.     Commodore  Vander- 
l>ilt  cleverly  secured  the  cooperation  of  the  "re- 
fornier"  element,  corralling  their  proxies,  and  thus 
lie  appeared  to  be  in  a  position  to  oust  the  Drew 
interests  without  diflSculty.     On  the  Sunday  pre- 
<  eding  the  election  the  Commodore  saw  Drew  and 
amicably  explained  to  him  the  trap  he  had  laid, 
and  showed  him  clearly  that  there  was  no  way  out 
of  the  situation.     Upon  this  disclosure.  Treasurer 
Drew  at  once  faced  about  and  agreed  to  join  hands 
with  Vanderbilt  in  giving  the  market  for  the  stock 
the  strong  upward  twist  it  had  lacked  before  that 
hour.     Jointly  they  would  make  so  much  money 
that  neither  side  would  lose  anything.     "Uncle 
Daniel "  went  away  apparently  satisfied  and  con- 
tented with  the  compromise. 

But  the  Commodore  had  not  finished.  A  few 
tiours  later  he  took  the  Boston  adventurers  into 
Ins  confidence  and  explained  that  he  proposed  to 


7«  niE  RAIIJIOAD  BUILDERS 

conlinuo  Drew  iti  ih«*  tliroctoratf.  The  Boston  itit'n 
were  pu/zled  imd  confusod  1)^'  this  sudden  change 
of  front.  lyjiler,  all  parties  met  at  Drew's  house, 
and  Vanderhiit  hrought  the  ])oston  men  to  terms 
by  profMising  a  plan  to  Drew  whereby  they  would 
be  entirely  left  out.  This  ruse  succtjeded  and  a 
written  agreement  to  the  advantage  of  all,  but  at 
the  expen.se  of  the  outside  stockholders  and  of  the 
general  public,  was  then  drawn  up. 

This,  however,  was  only  the  beginning  of  the 
fight.  Vanderbilt  was  now  in  the  Erie  as  a  joint 
owner,  but  he  had  stretched  out  his  hands  to 
control  the  roa<l  and  he  meant  to  .succeed.  In  Feb- 
ruary of  1868,  Frank  Work,  the  singK;  repre- 
sentative of  Vander!)ilt  on  the  Erie  board,  applied 
for  an  injunction  against  Trea.surer  Drew  and  his 
brother  <lirectors  to  restrain  them  from  the  repay- 
ment of  the  $3,500,000  borrowed  by  the  railroad 
from  Drew  in  1866.  and  to  restrain  Drew  from 
taking  any  legal  steps  toward  compelling  a  .settle- 
ment. Judge  Barnard  granted  a  temporary  in- 
junction, and  two  days  later  Vanderbilt's  attorney 
I>etitioned  for  the  removal  from  oflBce  of  Treasurer 
Drew.  The  papers  presented  in  the  case  exposed  a 
new  fountain  of  Erie  stock  which  had  up  to  that 
time  been  entirely  overlooked. 


THE  ERIE  RAILROAD  77 

A  recently  enacted  law  of  the  State  of  New  York 
'  probably  fathered  by  Drew  —  authorized  any 
niilroad  <'onipany  to  create  and  issue  its  own  stock 
in  exchange  for  the  stock  of  any  other  railroad 
under  lease  to  it.  Upon  the  basis  of  this  law  Drew 
iiiid  his  close  satellites  had  st?cretly  secured  owner- 
sliip  of  a  worthless  jjiec-e  of  roa<l  connecting  with 
tlu'  Erie  and  known  as  the  Buffalo.  Bradford 
iind  Pittsburgh.  Then,  as  their  {lersonal  needs  in 
tin-  stock-?narket  or  at  elections  demanded,  they 
liad  supplie<l  themselves  with  new  Erie  stinrk  by 
leasing  the  worthless  road  to  the  Erie  and  then 
exchanging  Erie  stock  for  the  worthless  stock  of  the 
leased  line.  The  cost  of  the  line  to  Drew  and  his 
fri«'nds.  as  financiers,  was  about  $25(),(K)().  They 
llicn  issued,  as  j>roprietors,  .$'2,0()0,()(M)  in  Inrnds  of 
tlic  roa<l,  payable  to  one  of  themselves  as  trustee. 
This  j)er.son  then  shifted  his  character,  became 
eoiinsel  for  both  sides,  and  drew  up  a  contract 
leasing  the  line  to  the  Erie  for  499  years,  the  Erie 
agnt'Ing  t<)  guarantee  the  bonds  in  consideration. 
Tlie.se  men  then  reappeartni  us  <lirectors  of  the  Erie 
;iim1  ratified  the  lea.se.  After  that  it  was  a  .simple 
matter  to  divide  the  loot.  The  Erie  was  thus 
saddle<l  with  u  $'2,000,000  mortgage  at  .seven  per 
<«iil  in  addition  to  a  further  i.ssue  of  capital  stock. 


7K 


THE  RAILROAD  BUn.DERS 


Following  the  first  injunction  another  was  now 
issued  restraining  Drew  anci  the  Erie  board  from 
making  any  further  issues  of  stock,  by  conversion 
of  Ijonds  or  otherwise,  and  also  forbidding  the 
Eri«'  to  guarantee^  any  further  issues  of  bonds.  An 
additional  injunction  forbade  Drew  from  having 
any  traiisacticms  in  Erie  stock  or  fulfilling  any 
contracts  until  he  had  returneii  to  the  treasury 
the  shan-s  involved  in  his  loan  transaction  of 
18««5  and  in  the  purchase  of  the  worthless  BuflPalo, 
Bra<lfonl  jmd  Pittsburgh  road. 

Matters  now  looked  forbidding  for  'J'reasurer 
Drew.  Instead  of  being  allowed  to  manufacture 
fresh  Erie  sUnk  certificates  at  his  own  will,  as  had 
IxHMi  Ills  habit  for  fifteen  years,  he  was  to  be  <'or- 
nen'd  by  a  legal  writ  and  forced  to  work  his  own 
ruin.  Hut  notwithst^mding  the  apparently  des- 
])eral<»  situation  it  wes  <juite  f-vident  that  Drew's 
nerv«s  wen-  not  seriously  atlrr>ti>d.  Although  he 
seemed  rushing  on  destruction,  he  continued  day 
after  <lay  to  j)ut  out  more  short  stock,  all  in  the 
face  of  a  steadily  rising  market.  His  plans,  ap- 
parently, were  carefully  matured.  »nd  h<'  said 
that  if  the  Conunodon-  wanted  the  stock  of  his 
•oad  he  w».uld  let  him  have  all  he  de.sire<l  at  the 
]» roper  priet*. 


THE  ERIE  RAIIJIOA])  79 

Am  usual  the  Erie  treasury  was  short  of  funds, 
and  as  usual  "Ilnrh'  Daniel"  stiiod  ready  to  ad- 
\  jim«e  all  the  money  n*c|uire<I  that  is.  on  proper 
M'<'urity.  Ther<'  was  hut  oni'  kind  of  security  to 
otTer  und  that  was  convertihle  Imnds.  No  stock 
could  Im«  issutMl  hy  the  eompany  for  less  than  par, 
lull  <-onvertil)le  honds  <'ould  he  dis[M)sed  of  hy  the 
.linntors  at  any  jiriee.  A  secret  ineefinK  <»'  the 
.  xi-cutive  eoinniittiv  was  held,  at  which  it  was 
vote<l  to  issue  iinnuHliately  and  to  offer  for  sale 
!!<l(M)(M>,(M>0  in  jonvertihle  honds  at  Til^.  Drew's 
l>roker  at  once  hecanie  tlu«  purcrhaser  of  $;j,0(N).()()0 
worth.  In  ten  minutes  after  the  meeting  had 
.Mljourned,  the  lumds  had  heen  issue<l,  their  eon- 
version  into  stock  demunde<l  and  made,  and  cer- 
tificati's  for  c;>(),()()0  shares  of  stock  defmsited  in 
;i  hroker's  safe,  subject  to  Drew's  order. 

A  few  days  later  cam«'  the  injunction,  and  Erie 
>l(K-k  liegan  to  soar  in  the  markets,  in  respon.se 
tt»  which  "TTncleDaniel,"  who  had  been  industrious- 
ly selling  liis  many  thousands  of  new  shares,  now 
determined  to  bring  up  the  reserves  and  let  the 
eager  buyers  have  the  other  five  millions;  but  be- 
fore the  l)onds  eouhl  be  converted  the  injunction 
had  l>een  served.  The  date  for  the  return  of  the 
writ  was  1  uesday  the  10th  of  March;  but  the  Erie 


m  THE  RAILROAD  BUILDERS 

ring  iu>i>dtHl  \vss  time  than  this  and  decided  un 
Monday  tho  J)th  as  the  day  to  defeat  the  comer. 

Saturday  and  Sunday  were  busy  days  for  Drew 
and  his  friends.  All  his  l>rokers  had  been  enjoined, 
so  a  dummy  was  nuule  the  nominal  purchaser  of 
the  bonds.  This  dummy  then  made  his  formal 
demand  for  the  conversion  of  the  l)onds  and  was 
refused.  All  this  was  done  ui)on  affidavit,  as  it  was 
the  plan  of  Drew  to  get  from  some  judge  a  writ  of 
mandamus  to  compel  the  Erie  Railroad  to  convert 
the  bonds.  The  stock  certificates  for  which  they 
were  to  be  exchanged  were  signed  in  blank  and 
nuide  ready  for  delivery. 

Drew  had  agreed  to  sell  50,000  shares  of  stock 
at  80  to  the  firms  of  which  Jay  Gould  and  James 
Fisk,  Jr.,  were  members;  they  were  also  Erie  direc- 
tors. On  Monday  morning,  the  9th  of  March,  the 
certificates,  filled  out  in  the  names  of  these  firms, 
were  handed  by  the  secretary  to  an  employee  who 
was  directed  to  carry  them  from  the  oflHce  of  the 
company  in  West  Street  to  the  transfer  clerk  io 
Pine  Street.  The  messenger  left,  but  in  a  moment 
or  two  returned  to  report  to  the  apparently  amazed 
secretary  that  Fisk  had  met  him  outside  the  door, 
had  taken  the  certificates  away  from  him,  and  "had 
run  away  with  them."    It  was  true.     The  stock 


THE  ERIE  RAILROAD 


81 


certificates  had  been  "stolen"  and  were  beyond 
the  control  of  an  injunction.  The  stock  certificates 
next  appeared  in  every  part  of  Wall  Street. 

On  the  same  day  the  Erie  representatives  applied 
to  Judge  Gilbert  of  Brooklyn  for  an  injunction  on 
the  ground  that  certain  persons,  including  Judge 
Burnard,  had  entered  into  a  conspiracy  to  specu- 
late in  Erie  stock  and  to  use  the  process  of  the 
courts  to  aid  the  speculation.  To  the  amazement 
of  everybody.  Judge  (iilhert  issued  an  injunction 
restraining  all  parties  to  all  the  other  suits  from 
further  proceedings;  in  one  paragraph  ordering 
the  Erie  directors  to  continue  in  the  discharge  of 
their  duties  —  in  direct  defiance  of  the  injunction 
(»f  one  judge  —  and  in  the  next  paragraph  for- 
hidding  the  directors  to  desist  in  the  conversion  of 
honds  —  in  direct  defiance  of  another  judge.  The 
Drew  interests  were  now  enjoined  in  every  direc- 
tion. One  judge  had  forbidden  them  to  move,  and 
another  judge  had  ordered  them  not  to  stand  still. 

It  was  a  strategic  position  which  Drew  and 
Ills  agents  could  not  have  improved  upon,  and 
while  matters  stood  this  way  the  50,000  shares  of 
Krie  stock  had  been  flung  on  the  market.  Vander- 
hilt,  who  was  ignorant  of  this  situation,  bought  the 
new  stock  as  eagerly  as  the  old.    Then,  when  the 


MICROCOPY    RESOLUTION    TEST   CHART 

(ANSI  and  ISO  TEST  CHART  No.  2) 


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SV2  TOE  RAILROAD  BUILDERS 

facts  came  out,  the  quotations  dropped  with  a 
thud.  Uncle  Daniel  was  victorious;  the  attempted 
corner  had  been  a  f.ilure;  and  the  Commodore  was 
holding  the  bag. 

Further  dramatic  events  followed.  The  Erie 
directors  learned  that  process  for  contempt  had 
been  issued  and  that  their  only  chance  of  escape 
from  jail  lay  in  immediate  ilight.  So,  stuffing  all 
that  was  worth  while  of  the  Erie  Railroad  into  their 
pockets,  they  made  off  under  cover  of  darkness  to 
Jersey  City.  One  man  carried  with  him  in  a  hack- 
ney coach  over  $6,000,000  in  greenbacks.  Two  of 
the  directors  lingered  and  were  arrested;  but  a 
majority  collected  at  the  Erie  station  in  Jersey 
City  and  there,  free  from  interference,  went  on 
with  the  transaction  of  business.  Without  dis- 
turbance they  were  able  to  count  their  expenses 
and  divide  the  profits. 

Vanderbilt  was  now  loaded  up  with  reams  of 
Erie  stock  at  high  costs,  and  the  load  was  a  severe 
strain  on  him.  He  dared  not  sell  for  fear  of  causing 
a  financial  collapse.  Drew  had  taken  away  about 
seven  million  dollars  of  his  money  and  an  artificial 
stringency  had  been  created  in  Wall  Street  by  this 
exodus  of  most  of  its  available  cash.  But  Van- 
derbilt weathered  the  storm  and,  as  his  generally 


THE  ERIE  RAILROAD  gS 

optimistic   attitude  inspired  confidence,  the  sky 
began  to  clear. 

But  this  stock-market  battle  did  not  end  the 
war.     New    injunctions    flew    in    all    directions. 
Osgood,  son-in-law  of  Vanderbilt,  was  appointed 
receiver  of  the  100,000  shares  of  illegally  issued 
stock  and  was  immediately  enjoined  from  acting 
l)y  another  judge.    Then  Peter  B.  Sweeney,  of  the 
Tammany  ring,  was  appointed  in  his  stead  without 
notice  to  the  other  side.    There  was  nothing  for  a 
receiver  to  do,  as  every  dollar  he  was  to  "receive" 
was  known  to  be  in  New  Jersey  and  beyond  his 
reach.    Nevertheless  he  was  subsequently  allowed 
a  fee  of  $150,000  by  Judge  Barnard  for  his  services! 
While  the  legal  battle  was  going  on  neither  Drew 
nor  \'anderbilt  was  idle.    A  plot  was  arranged  for 
bringmg  the  Erie  directors  over  by  force,  but  this 
ailed.     In  the  meanwhile  the  Erie  directors  per- 
suaded the  New  Jersey  Legislature  to  rush  through 
'i  bill  making  the  Erie  Railway  a  New  Jersey  cor- 
poration.   This  move,  however,  was  intended  mere- 
'y  to  meet  an  emergency.    It  was  the  intention  of  the 
'^rie  interests  to  do  their  real  work  with  the  Legis- 
ature  at  Albany.     This  was  also  the  intention  of 
the  Vanderbilt  interests.    Consequently,  during  the 
subsequent  session,  the  grafters  in  that  body  were 


84  THE  RAILROAD  BUILDERS 

wooed  by  both  sides.  When  the  Legislature  con- 
vened, a  bill  was  promptly  introduced  making 
legal  the  recent  issue  of  Erie  stock,  regulating  the 
power  to  issue  convertible  bonds,  providing  for  the 
guaranty  of  the  bonds  of  the  Boston,  Hartford  and 
Erie,  and  forbidding  the  consolidation  of  the  Cen- 
tral and  the  Erie  under  the  control  of  Cornelius 
Vanderbilt.  But  evidently  the  Commodore's  purse 
was  open  wider  than  "Uncle  Daniel's, "  for  this  bill 
was  defeated  Ly  a  decisive  vote. 

Now  Jay  Gould  appeared  upon  the  scene.  He 
left  Jersey  City  with  half  a  million  of  the  Erie's 
money  in  his  pocket  and  arrived  in  Albany  im^ 
mediately  after  the  defeat  of  this  bill.  On  his 
arrival  he  was  arrested  on  a  writ  issued  against 
him  for  contempt  of  court  and  was  held  in  bail  of 
half  a  million  dollars  for  his  appearance  in  New 
York  a  few  days  later.  He  appeared  before  Judge 
Barnard  in  New  York  and  was  put  in  the  charge 
of  a  sheriff.  But  the  sheriff  was  served  with  a  writ 
of  habeas  corpus,  and  Gould  was  again  brought  be- 
fore the  court.  Then  in  some  mysterious  way  the 
hearing  was  deferred  and  Gould  returned  to  Al- 
bany, taking  the  oflScer  as  a  traveling  companion. 

After  reaching  his  destination  Gould  became  so 
ill  that  he  could  not  return  to  New  York,  though 


THE  ERIE  RAILROAD  85 

he  managed  to  go  to  the  Capitol  in  a  driving  snow- 
storm.    Here  he  became  rapidly  convalescent,  as 
did  also  many  members  of  the  Legislature.    Mem- 
bers, indeed,  who  had  been  too  sick  or  too  feeble 
to  attend  the  legislative  sessions  during  this  cold 
winter  suddenly  found  their  health  returning  and 
flocked  to  Albany  on  the  fastest  trains.     Gould 
stayed  in  Albany  until  April,  and  by  this  time  a 
remarkable  change  had  come  over  the  mentality 
of  a  majority  of  the  legislators.     On  the  13th  of 
April  a  bill  was  presented  in  the  Senate  which  met 
the  approval  of  the  Erie  interests  and  which  Judge 
Barnard  afterwards  designated  as  a  bill  for  legaliz- 
ing counterfeit  money.    This  bill,  which  was  passed 
after  due  debate,  legalized  the  issues  of  Erie  bonds 
and  stocks  which  had  been  put  out  by  Drew;  it 
provided  for  the  guaranty  of  the  bonds  of  connect- 
ing roads  as  desired  by  Drew;  and  it  forbade  all 
possible  contracts  for   consolidation  or  division 
of  receipts  between  the  Erie  and  the  Vanderbilt 
roads,  a  provision  also  desired  by  Drew.    In  fact 
it  was  the  same  bill  in  different  form  that  had  been 
Voted  down  so  decisively  a  short  time  before. 

But  the  real  tug  of  war  was  to  get  the  bill 
through  the  lower  House.  Fabulous  stories  were 
told  of  money  which  would  be  expended  and  the 


•    *i 


80  THE  RAILROAD  BUILDERS 

market  quotations  for  votes  never  soared  so  high. 
Then,  at  the  critical  moment,  Vanderbilt  sur- 
rendered, made  a  secret  deal  with  his  foe,  and  with- 
drew his  opposition  to  the  bill.  The  anger  of 
the  disappointed  grafters  and  vote-sellers  knew  no 
bounds,  and  they  immediately  set  to  work  passing 
other  bills  which  they  felt  would  annoy  or  injure 
Vanderbilt,  with  the  hope  that  he  would  still  be 
induced  to  give  them  what  they  regarded  as  their 
rightful  spoils. 

The  details  of  this  settlement  between  Drew  and 
Vanderbilt  were  not  announced  until  some  months 
afterward.  By  the  terms  agreed  on  Vanderbilt  was 
relieved  of  50,000  shares  of  Erie  stock  at  70,  pay- 
able partly  in  cash  and  partly  in  bonds  guaranteed 
by  the  Erie,  and  received  $1,000,000  in  cash  for  an 
option  given  the  Erie  Railroad  to  purchase  his  re- 
maining 50,000  shares  at  70  within  four  months, 
besides  about  $430,000  to  compensate  his  friends 
who  had  worked  so  heroically  for  him.  This  total 
sum  of  nearly  $5,000,000  no  doubt  represented  part 
of  the  "slush  fund"  which  Drew  expected  that 
the  company  would  have  to  give  up  to  the  venal 
legislators,  and  it  was  therefore  no  hardship  to 
hand  it  over  to  Vanderbilt  instead. 

As  a  part  of  the  general  settlement  the  Boston 


THE  ERIE  RAILROAD  87 

interests  were  relieved  of  their  $5,000,000  of  largely 
worthless  bonds  of  the  Boston,  Hartford  and  Erie 
Railroad,  for  which  they  received  $4,000,000  of 
Erie  securities.  Thus  in  all  about  $9,000,000  in 
cash  or  securities  was  drawn  out  of  the  Erie  treas- 
ury in  final  settlement  of  this  great  stock-market 
manipulation.  And  this  does  not  include  the  pick- 
ings of  Gould  and  Fisk  and  the  smaller  fry,  of 
which  there  is  no  official  record.  But  that  these 
U'cntlemen  did  not  go  empty-handed  there  is  not 
the  shadow  of  a  doubt! 

The  sensational  stock-market  deal  between  the 
Drew  and  Vanderbilt  interests  was  but  a  truce, 
however,  and  did  not  settle  the  troubles  of  the  Erie. 
Jay  Gould  was  now  becoming  a  dominating  factor 
and  in  October  of  1868  was  chosen  president.  The 
various  stock-market  struggles  that  ensued  from 
the  ascendency  of  Jay  Gould  to  the  receivership 
of  the  Erie  in  1875  is  a  long  and  intricate  tale. 
?>uffice  it  to  say  that  the  events  were  generally 
similar  to  those  already  recounted  —  stock-market 
forners,  over-issues  of  bonds  and  stocks,  injunc- 
f  ions,  court  orders,  arrests,  legislative  bribes.  Less 
tlian  a  week  after  his  election  Jay  Gould  frankly 
iinnounced  that  the   company   had   just  issued 


88  THE  RAILROAD  BUILDERS 

$10,000,000  of  convertible  bonds  and  that  a  third 
of  these  had  already  been  converted  into  stock. 
He  further  announced  that  the  company  now  had 
$60,000,000  of  common  stock  outstanding,  where- 
as the  public  had  understood  that  it  was  only 
$45,000,000. 

During  the  few  years  that  followed,  the  poor 
Erie  was  systematically  looted.  Millions  were 
wasted  in  New  York  real-estate  speculation,  and 
the  company's  money  was  used  in  the  erection  of 
the  Grand  Opera  House  on  Twenty-third  Street, 
to  which  the  executive  oflSces  of  the  Erie  Railroad 
were  moved.  Finally  the  new  ring,  comprising  as 
leading  spirits  Jay  Gould  and  James  Fisk,  Jr., 
eliminated  Daniel  Drew  and  left  him  high  and 
dry  without  a  cent,  through  a  new  stock  comer. 
About  this  time  the  road  was  financially  on  its  last 
legs,  and  Jay  Gould  was  appointed  receiver.  This 
started  further  litigation  which  dragged  on  for 
several  years  until,  in  1874,  Gould  was  turned  out 
by  General  Daniel  E.  Sickles  in  combination  with 
the  English  shareholders.  The  new  interests,  when 
they  finally  got  control,  elected  an  entirely  new 
management  and  made  H.  J.  Jewett,  a  practical 
railroad  man.  president.  But  the  Erie  was  already 
bankrupt,  and  not  much  could  be  done  toward 


THE  ERIE  RAH^ROAD  80 

saving  the  situation.  In  May,  1875,  the  road 
confessed  inability  to  meet  its  obligations,  and 
Jewett  was  appointed  receiver. 

It  was  three  years  from  the  date  of  the  receiver- 
ship before  the  Erie  property  was  taken  out  of  the 
hands  of  the  courts.  In  April,  1878,  a  new  com- 
pany, the  New  York,  Lake  Erie  and  Western  Rail- 
road, took  over  the  property;  Jewett  was  elected 
its  president,  and  a  new  chapter  in  the  history  of 
the  property  began. 

Had  the  reorganization  of  the  Erie  been  drastic 
enough,  the  road  might  not  so  soon  have  fallen 
into  financial  difficulties  again,  for  it  owned  valu- 
able coal  lands  in  Eastern  Pennsylvania  and  rap- 
idly increased  its  earnings  in  this  region.    More- 
over the  extension  of  the  system  westward  should 
have  increased  its  earning  capacity.     Up  to  this 
time  the  Erie  had  no  Chicago  connection  and  was 
at  an  obvious  disadvantage  compared  with  its  com- 
petitors.   It  improved  this  situation  in  1881  by  ac- 
quiring the  New  York,  Pennsylvania  and  Ohio,  and 
the  franchise  of  the  Chicago  and  Atlantic  Railway. 
Two  years  later  it  obtained  control  of  the  Cincinnati, 
Hamilton  and  Dayton  and  found  itself  in  a  position 
in  which  it  could  compete  for  through  traffic  with 
the  Pennsylvania  and  the  New  York  Central. 


90  THE  RAILROAD  BUILDERS 

But  in  carrying  through  these  extensive  plans, 
the  Erie  again  became  involved  in  financial  difficul- 
ties; the  sensational  Grant  and  Ward  failure  in 
Wall  Street  in  1884  was  a  severe  blow  to  the  com- 
pany's credit,  as  this  firm  was  at  that  time  doing 
important  financing  for  the  Erie.  The  English 
security  holders  stepped  to  the  front  again,  de- 
manded President  Jewett's  resignation,  and  elected 
John  King  in  his  stead. 

In  1885  and  1886  a  financial  readjustment  took 
place,  but  the  company  continued  to  carry  the 
bulk  of  the  heavy  load  of  obligations  which  had 
been  created  during  the  years  of  the  Drew  and 
Gould  managements.    It  was  surely  an  evidence 
of  the  inherent  worth  of  the  property  that  during 
the  half  dozen  or  more  years  following,  the  Erie 
succeeded  in  struggling  along  in  the  face  of  all  its 
financial  and  other  handicaps  and  at  the  same  time 
showed  substantial  growth  in  the  volume  of  its 
business.     The  company  was  kept  above  water 
until  1893  without  again  appealing  to  the  courts; 
but  by  that  time  the  indebtedness  had  once  more 
mounted,  and  in  July  of  that  year  Erie  receivers 
were  appointed  for  the  fourth  time  in  its  history. 
The  name  of  Pierpont  Morgan  is  closely  identified 
with  the  story  of  the  railroad  during  this  latest 


THE  ERIE  RAIIJIOAD  91 

reorganization  period.     Morgan's  firm  came  to  the 
front  in  1894,  with  the  powerful  backing  of  the 
large  English  interests,  and  proposed  a  plan  which 
involved  heavy  sacrifices  by  many  of  the  security 
holders  but  which  was  designed  to  insure  the  per- 
manent future  of  the  property.     The  plan  was 
vigorously  opposed,  however,  by  Edward  H.  Har- 
riman,  August  Belmont,  and  other  powerful  in- 
terests, and  it  was  not  until  August,  1896,  that  a 
final  compromise  was  effected  and  a  reorganization 
was  carried  through.     But  at  last  the  Erie  was 
taken  out  of  receivership,  and  an  entirely  new 
company,  intelligently  designed  and  having  am- 
ple working  capital  for  future  development,  was 
formed  with  E.  B.  Thomas  at  its  head.     This  new 
president,  like  Daniel  Willard  of  the  Baltimore 
and  Ohio  and  many  of  the  modem  railroad  leaders, 
was  a  practical  railroad  man  who  had  worked  up 
from  the  ranks  and  who  had  no  large  financial 
interest  or  banking  connections  to  divert  his  atten- 
tion from  the  real  business  of  management.    Under 
Thomas,  who  remained  at  the  head  of  affairs  from 
1896  to  1900,  the  Erie  made  substantial  progress. 
The  system  was  solidified  and  its  territory  was 
more  uniformly  and  systematically  developed.    In 
1898,  the  Erie  secured  control  of  the  New  York. 


iH  THK  RAILROAD  BUILDERS 

Susquehanna  and  Western  system,  gaining  thereby 
an  important  branch  to  Wilkesbarre;  and  in  1901 
it  purchased  jointly  with  the  Lehigh  Valley  Rail- 
road  the  stock  of  the  Pennsylvania  Coal  Company 
of  which  the  Erie  later  became  sole  owner.   The 
real  achievement  of  the  Thomas  administration  was 
the  development  of  the  property  as  a  heavy  car- 
rier of  anthracite  coal.    On  the  financial  side  dur- 
ing  this  period  the  credit  of  the  House  of  Morgan, 
intelligent   administration,  and   modern  methods 
did  much  to  improve  the  reputation  of  the  Erie 
and  enable  it  to  live  down  its  bad  inheritance. 

In  1901  Frederick  D.  Underwood  succeeded 
Thomas.  Like  his  predecessor.  Underwood  repre- 
sented the  modern  type  of  railroad  president - 
a  hard-working,  eminently  practical  big  business 
manager  of  great  executive  talent.  Underwood's 
idea  was  to  make  the  Erie  a  great  freight-carrying 
system  by  developing  its  tonnage  and  its  freight 
capacity  in  every  way  possible.  Consequently  he 
favored  opening  up  the  property  more  extensive- 
ly in  the  soft  coal  fields  of  Ohio  and  Indiana,  re- 
constructing roadbeds,  laying  extra  tracks,  and 
eliminating  grades  and  curves. 

The  history  of  the  Erie  Railroad  ever  since  1901 
has  been  a  record  of  progress.    During  the«e  years 


THE  ERIE  RAILROAD  93 

the  system  has  been  practically  rebuilt.     It  now 

has  a  double  track  from  New  York  to  Chicago;  it 

has  extensive  mileage  in  the  soft  coal  regions'of 

Ohio  and  Indiana,  and  its  soft  coal  tonnage  today 

far  overtops  its  tonnage  of  antK    .cite  coal;  its 

train  load  averages  far  higher  than  that  of  the 

New  York  Central  or  of  any  other  Eastern  trunk 

lines  except  the  Pennsylvania;  its  steep  grades 

throughout  New  York  State  have  been  for  the  most 

part  eliminated,  and  many  short  cuts  for  freight 

traffic  have  been  built. 

In  carrying  through   these  extensive  develop- 
ments in  fifteen  years  the  Erie  has  spent  hundreds 
of  millions  of  dollars.     More  money  indeed  has 
been  used  legitimately  for  improvement  and  de- 
velopment since  the  reorganizaton  of  1896  than 
during  the  previous  sixty  years  of  its   existence. 
Of  course  this  outlay  has  meant  that  the  Erie  has 
had  to  create  new  mortgages  and  borrow  many 
millions;  but  a  large  part  of  the  expenditure  for  im- 
provement has  come  directly  from  earnings.     The 
Underwood  administration  has  been  conservative 
in  paying  dividends  and  the  stockholders  grumble. 
But  the  Erie  is  at  last  coming  into  its  own.    Instead 
of  being  a  speculative  football  and  a  hopelessly 
bankrupt  road,  as  it  was  for  nearly  forty  years,  it 


M  THE  RAILROAD  BUILDEHS 

is  n  in  the  forefront  of  the  great  trunk  lines  of 
the  eastern  section  of  the  United  States.  It  is  no 
longer,  what  it  was  called  for  many  years,  the 
"scarlet  woman  of  Wall  Street,"  but  is  a  respect- 
able  member  of  the  American  railroad  family. 


CHAPTER  V 


CROSSING    THE  APPALACHIAN  RANGE 

The  story  of  the  Baltimore  and  Ohio  Railroad 
takes  us  back  more  than  ninety  years.    When  the 
scheme  for  the  construction  of  a  railroad  from  Bal- 
timore to  the  waters  of  the  Ohio  River  first  began 
to  take  form,  the  United  States  had  barely  emerged 
from  the  Revolutionary  period.     Many  of  the  fa- 
mous men   of  that  great   day  were  still  living. 
John  Adams  and  Thomas  JeflFerson  had  been  dead 
only  a  year;  Madison  and  Monroe  had  recently 
retired  from  public  life;  John  Quincy  Adams  held 
the  office  of  President,  and  the  "reign"  of  Andrew 
Jackson  had  not  yet  begun. 

At  this  time  steam  navigation  on  the  rivers  was 
only  in  its  beginnings,  but  no  one  could  doubt  that 
it  would  come  into  general  use.  Two  decades  had 
passed  since  the  Clermont  had  been  launched  on  the 
Hudson  by  Robert  Fulton,  and  steamboats  were 
now  carrying  cargoes  successfully  against  the  swift 

95 


':      fl 


J>«  THE  RAILROAD  BUILDERS 

currents  up  the  Mississippi  from  New  Orleans  and 
were  threatening  the  extinction  of  the  aggressive 
flatboat  traffic.    Great  strides  had  also  been  made 
m  the  construction  of  turnpike  roads.    The  famous 
National  Pike  from  Cumberland  to  Vandalia.  Illi- 
nois,  had  been  in  large  part  completed  and  had  done 
much  for  the  opening  up  of  the  Western  territory. 
Canal  building  was  likewise  an  extensive  de- 
velopment  of  this  period.    The  idea  of  connecting 
the  waters  of  the  Chesapeake  with  those  of  the 
Ohio  had  been  broached  by  George  Washington 
before  the  Revolution,  and  he  had  also  prophesied 
the  union  of  the  Hudson  and  Lake  Erie  by  canal 
He  believed   that  a  country  of  such  great  geo- 
graphical extent  as  the  United  States  could  not  be 
held  together  except  by  close  commercial  bonds. 

The  opening  of  the  Erie  Canal  to  New  York  in 
1825  stimulated  other  cities  on  the  Atlantic  sea- 
board  to  put  themselves  into  closer  commercial 
touch  with  the  West.  This  was  especially  true  of 
the  city  of  Baltimore.  A  canal  connecting  Chesa- 
peake  Bay  and  the  Ohio  River  was  advocated  to 
protect  the  trade  of  Baltimore  and  the  South 
from  the  competition  of  New  York  and  the  East 
which  would  inevitably  result  from  the  construe 
tion  of  the  Erie  Canal  and  the  Public  Works  of 


CROSSING  THE  APPALACHIAN  RANGE    97 

Pennsylvania.  But  discouragements  in  plenty  frus- 
trated the  plan.    The  cost  was  believed  to  be  exces- 
sive and  the  engineering  difficulties  were  said  to 
be  almost  insuperable.    George  Bernard,  a  French 
engineer,  was  of  the  opinion  that  the  high  eleva- 
tions and  scarcity  of  water  along  the  route  would 
prevent  such  a  canal  from  having  much  practical 
value.    For  these  reasons  Baltimore  believed  that 
its  position  as  a  center  for  the  rapidly  developing 
Western  trade  was  slowly  but  surely  slipping  away. 
This  was  the  situation  that  led  to  the  building 
of  the  Baltimore  and  Ohio  Railroad .     Two  men  -- 
Philip  E.  Thomas  and  George  Brown  —  were  the 
pioneers  in  this  great  undertaking.    They  spent 
the  year  1826  investigating  railway  enterprises  in 
England,  which  were  at  that  time  being  tested  in 
a  comprehensive  fashion  as  commercial  ventures. 
Their  investigation  completed,  they  held  a  meet- 
ing on  February  12,  1827,  including  about  twenty- 
five  citizens,  most  of  whom  were  Baltimore  mer- 
chants or  bankers,  "to  take  into  consideration  the 
oest  means  of  restoring  to  the  city  of  Baltimore 
that  portion  of  the  western  trade  which  has  lately 
been  diverted  from  it  by  the  introduction  of  steam 
navigation  and  by  other  causes."    The  outcome 
was  an  application  to  the  Maryland  Legislature 


.J8  THE  RAILROAD  BUILDERS 

for  a  charter  for  a  company  to  be  known  as  "The 
Baltimore  and  Ohio  Railroad  Company"  having 
the  right  to  build  and  operate  a  railroad  from  the 
city  of  Baltimore  to  the  Ohio  River.  The  formal 
organization  took  place  on  April  24,  1827,  with 
Philip  E.  Thomas  as  president  and  George  Brown 
astreasurer.  The  capital  of  the  pr .  -sed  company 
was  fixed  at  five  million  dollars. 

The  construction  of  the  railroad  began  on  July 
4, 1828.  The  venerable  Charles  Carroll  of  Carroll- 
ton,  then  more  than  ninety  years  old  and  the  only 
surviving  signer  of  the  Declaration  of  Independ- 
enceof  fifty-two  years  before,  said  on  this  occasion, 
as  he  laid  the  first  stone:  "I  consider  this  among 
the  most  important  acts  of  my  life,  second  only 
to  my  signing  the  Declaration  of  Independence." 
His  vision  was  indeed  prophetic. 

It  was  determined  that  the  first  section  of  road 
constructed  should  extend  to  Ellicott's  Mills, 
twelve  miles  distant,  but,  owing  to  delays  in  ob- 
taining capital,  the  actual  laying  of  the  rails  was 
not  begun  until  the  fall  of  1829,  and  this  first  sec- 
tion  was  not  opened  for  traflic  until  May  22,  1830. 
At  first,  experiments  were  made  with  sails  for  pro- 
pelling the  cars,  but  it  was  soon  found  that  a  more 
eflFective  source  of  power  was  supplied  by  mules 


CROSSING  THE  API-aLACHIAN  RANGE   90 

and  horses.     The  Flying  Dutchman,  one  of  the 
cars  devised  to  furnish  motive  power,  provided  for 
the  horse  or  mule  a  treadmill  which  would  revolve 
the  wheels  and  make  the  distance  of  twelve  miles 
in  about  an  hour  and  a  quarter.    Steam  locomo- 
tives at  this  time  were  in  their  infancy  and,  un- 
til the  opening  of  the  Liverpool  and  Manchester 
Railroad  in  this  same  year,  they  had  attained 
a  speed  of  only  six  miles  an  hour.     Horses  and 
mules,  and  even  sail  cars,  made  more  rapid  progress 
than  did  the  earliest  locomotive     In  spite  of  these 
crude  and  primitive  facilities  for  transportation, 
however,  the  traffic  on  the  new  railroad  was  of 
large  volume  from  the  beginning,  and  the  com- 
pany could  not  handle  the  amount  of  merchandise 
offered  for  transport  in  the  first  months. 

Construction  was  now  rapidly  pushed  ahead, 
and  by  1832  the  whole  line  had  been  opened  to 
Point  of  Rocks,  with  a  branch  to  Frederick,  Mary- 
land, making  seventy-two  miles  in  all.  In  1831, 
steam  locomotives  were  tested,  and  one  of  them, 
the  York,  was  found  capable  of  conveying  fifteen 
tons  at  the  rate  of  fifteen  miles  an  hour  on  level 
portions  of  the  road.  This  achievement  was  re- 
garded as  a  great  triumph,  and  in  1832  the  direc- 
tors of  the  road  called  attention  to  **the  great 


I    11 


lOO  THE  RAILROAD  BUILDERS 

increase  in  velocity"  that  had  been  obtained  in 
this  way. 

From  this  time  forward  the  expansion  of  the 
railroad  proceeded  with  a  certainty  bom  of  success. 
A  branch  was  built  to  Washington  and  the  main 
line  was  extended  to  Harper's  Ferry.    Beyond  this 
point  construction  was  slow  because  financial  dif- 
ficulties stood  in  the  way,  and  it  was  not  until 
after  the  panic  of  1837  that  further  aggressive 
building  began.    But  by  1842  the  line  was  com- 
pleted  to  Cumberland,  Maryland,  and  by  1858, 
to  Wheeling.    Meanwhile,  the  branch  from  Cum- 
berland to  Parkersburg,  Virginia,  was  built.    The 
road  now  comprised  a  total  system  of  more  than 
five  hundred  miles  and  reached  two  points  of  im- 
portance on  the  Ohio  River,  one  northward  near 
the  Pennsylvania-Ohio  state  line  and  one  south- 
ward in  the  direction  of  Cincinnati.     The  Par- 
kersburg extension  was  of  great  importance  because 
it  opened  a  through  route  to  St.  Louis,  by  means 
of  the  Cincinnati  and  Marietta  Railroad  —  which 
was  at  this  time  completed  from  Cincinnati  to 
Belpre,    Ohio,   opposite    Parkersburg — and   the 
Ohio  and  Mississippi,  which  extended  more  than 
three  hundred  miles  from  St.  Louis  to  Cincinnati. 
Times  were  not  the  best,  however,  and,  although 


CROSSING  THE  APPALACHIAN  RANGE    101 

much  traffic  was  developed,  the  immense  cost  of 
the  extensions  heavily  burdened   the  Baltimore 
and  Ohio    Company,   while  the  panic   of    1857 
seriously  embarrassed  its  credit.    Soon  after  this 
panic  and  before  the  company  had  begun  to  re- 
cover from  its  eflFects,  John  W.  Garrett,  one  of  the 
large  stockholders  in  the  road  and  son  of  a  Balti- 
more banker,  was  elected  to  its  presidency,  and  a 
new  chapter  in  the  history  of  the  Baltimore  and 
Ohio  began.    Almost  immediately  following  Gar- 
rett's election,  a  remarkable  change  became  appar- 
ent.   Losses  were  turned  into  gains;  deficits  were 
converted  into  surpluses;  and  soon  Garrett  had 
gained  the  reputation  of  being  the  most  remark- 
able and  efficient  railroad  manager  in  the  world. 
He  seemed  to  be  almost  an  Aladdin  of  railroad 
management  for,  even  when  he  could  not  show  in- 
creases in  amount  of  business  done,  he  reported 
greater  profits  by   showing  lower  expenses.    In 
those  days  the  railroads  did  not  furnish  detailed 
reports  of  business  to  the  stockholders  or  to  the 
public.    At  the  annual  meetings  it  was  customary 
for  a  president  or  the  directors  simply  to  an- 
nounce, either  orally  or  in  a  brief  printed  state- 
ment, the  amount  of  gross  business  and  profits  foF 
the  year.    No  such  thing  as  a  balance  sheet  or 


102  THE  RAILROAD  BUILDERS 

detailed  financial  statement  saw  the  light  of  day — 
practically  everything  was  taken  by  the  stock- 
holders on  faith.  And  great  was  their  faith.  When, 
therefore,  Garrett  announced  large  increases  in 
profits  in  years  when  most  railroads  were  standing 
still  or  were  incurring  losses,  he  was  implicitly 
believed. 

Under  Garrett's  management  a  new  era  of  ex- 
pansion  almost   immediately   began;   work   was 
started  on  the  long  delayed  branch  to  Pittsburgh 
and  plans  were  laid  for  establishing  a  line  of  steam- 
ships  from  Baltimore  to  the  leading  European 
ports.     But  the  Civil  War,  which  bore  heavily 
on  the  Baltimore  and  Ohio,  interfered  with  these 
ambitious  schemes.    Early  in  1861  the  Confeder- 
ates took  possession  of  a  large  part  of  the  line  east 
of  Cumberland;  in  the  next  four  years  important 
sections  of  the  road  were  repeatedly  destroyed  and 
rebuilt,  as  they  passed  into  the  hands  of  the  Fed- 
eral or  Confederate  troops.    The  company,  how- 
ever, managed  to  get  through  without  default  in 
its  securities,  and,  when  peace  was  restored  in 
1865,  the  Baltimore  and  Ohio  resumed  its  policy  of 
aggressive  expansion. 

Before  very  long  the  road,  with  its  connections 
constructed  or  purchased,  reached  the  cities  of 


CROSSING  THE  APPALACHIAN  RANGE    108 

Pittsburgh,  Sandusky,  and  Chicago,  and  furthef 
strengthened  its  connections  with  Cincinnati  and 
St.  Louis.   It  acquired  steamboats,  grain  eleva- 
tors, and  docks;  it  constructed  hotels  as  mountain 
summer  resorts;  it  built  dry  docks  in  Baltimore; 
and  finally  it  proceeded  to  organize  and  operate 
an  express  company,  a  telegraph  company,  and  a 
sleeping-car  company.    To  carry  out  these  am- 
bitious plans  the  capital  stock  and  debt  were  of 
course  increased  again  and  again,  and  in  the  course 
of  these  operations  a  large  part  of  the  new  securi- 
ties issued  was  sold  to  English  investors.    Not- 
withstanding these  great  increases  in  liabilities, 
the  company  continued  to  report  large  surpluses 
and  to  pay  large  dividends,  —  generally  ten  per 
cent  annually.    In  fact,  this  liberal  rate  was,  with 
brief  exceptions,  paid  right  through  the  Civil  War 
period,  in  spite  of  the  fact  that  large  parts  of 
the  line  were  frequently  destroyed  and  traffic  was 
often  at  a  standstill.    With  such  prosperity  under 
such  conditions  Garrett's  reputation  as  a  railroad 
manager  naturally  suffered  no  eclipse. 

In  the  course  of  the  Civil  War,  as  already  noted, 
through  traffic  routes  from  New  York  to  Chicago 
had  been  established,  and  in  the  succeeding  years 
the  consolidations  of  the  great  competing  systems 


104  THE  RAILROAD  BUILDERS 

into  trunk  lines  had  teken  place.    The  struggle  of 
the  Baltimore  and  Ohio  for  its  share  of  Western 
business  led  to  fierce  rivalry  with  the  Pennsylvania. 
This  competition  became  so  severe  and  intense 
that,  in  1874,  the  Pennsylvania  road  refused  to 
carry  the  Baltimore  and  Ohio  cars  over  its  line 
to  New  York  on  any  terms  whatever.    Since  this 
was  the  only  way  in  which  the  Baltimore  and  Ohio 
could  reach  New  York,  the  situation  was  a  serious 
one.    Garrett  retaliated  by  making  destructive  re- 
ductions in  passenger  rates  from  Washington  and 
Baltimore  to  Western  points.    The  cuts  were  soon 
made  on  other  roads  and  affected  both  freight  and 
passengers.    All  the  lines  became  involved.    Pas- 
senger fares  from  Chicago  to  Baltimore  and  Wash- 
ington were  reduced  from  nineteen  dollars  to  nine 
dollars,  and  those  to  New  York  and  Boston  from 
twenty-two  to  fifteen  dollars.    Still  the  fight  con- 
tinued, and  before  the  end  of  1875  it  was  possible 
to  travel  from  Chicago  to  New  York  first  class  for 
twelve  dollars  and  to  ship  grain  to  New  York  for  a^ 
low  a  rate  as  twelve  cents. 

Despite  the  fact  that  competition  had  cut  earn- 
ings almost  to  the  point  of  extinction,  the  Balti- 
more and  Ohio  continued  to  report  surprisingly 
good  profits.    The  company  borrowed  additional 


CROSSING  THE  APPALACHIAN  RANGE    104 

funds  from  time  to  time  but  continued  to  pay  the 
liberal  ten  per  cent  dividend  until  1877,  when  it 
somewhat  reduced  the  rate.  These  dividend  pay- 
ments indicated,  however,  a  prosperity  that  was 
only  apparent,  and  they  did  not  greatly  deceive  the 
bankers,  for  the  credit  of  the  Baltimore  and  Ohio 
weakened  from  day  to  day.  The  fact  is  that  the 
reports  of  operations  inspired  little  public  confi- 
dence; to  the  farseeing,  there  were  danger  signals 
ihead.  Nevertheless  the  ten  per  cent  dividends 
were  resumed  in  1879  and  continued  at  this  rate 
without  interruption  until  1886. 

On  the  death  of  John  W.  Garrett  in  1884,  his  son 
Robert,  who  succeeded  him  as  president,  continued 
the  same  policy  of  -     petition  and  aggression. 
With  the  object  of  gai.  .ig  an  entrance  into  Phila- 
delphia and  through  that  gateway  of  reaching  New 
York,  he  started  work  on  a  branch  from  Baltimore 
to  Philadelphia  to  meet,  at  the  northern  boundary 
of  Maryland,  the  Baltimore  and  Philadelphia  Rail- 
road—a line  which  independent  interests  were 
then  building  through  Delaware  with  the  intention 
of  obtaining  an  entrance  into  Philadelphia.    The 
Pennsylvania  interests  strongly  opposed  Garrett's 
new  project  and  many  years  before  had  gone  so 
far,  in  their  determination  to  block  the  Baltimore 


'if 


lOfi  THE  RAILROAD  BUILDERS 

and  Ohio  from  acquiring  control  of  the  Philadel- 
phia, Wilmington  and  Baltimore  Railroad,  as  to 
purchase  that  road  themselves.     Despite  this  op- 
position the  Baltimore  and  Ohio  went  forward  with 
their  plans  and  secured  an  entry  into  Philadelphia 
by  acquiring  control  of  the  Schuylkill  East  Side 
Railway,  which  was  a  short  terminal  road  of  great 
strategic  value.    North  of  Philadelphia  the  com- 
pany arranged  a  traflSc  contract  with  the  Philadel- 
phia and  Reading,  whose  lines  extended  to  Bound 
Brook,  New  Jersey,  and  also  with  the  Central 
Railroad  of  New  Jersey  beyond  Bound  Brook  to 
Jersey  City.    Afterward,  by  purchasing  the  Staten 
Island  Rapid  Transit  Company  the  Baltimore  &^^ 
Ohio  acquired  extensive  terminals  at  tidewati 
on  Staten  Island  and  constructed  a  connection  in 
New  Jersey  with  the  New  Jersey  Central.     Thus, 
after  many  years  of  struggle  and  at  heavy  cost, 
the  Baltimore  and  Ohio  finally  secured  an  entry 
into  the  New  York  district  independently  of  the 
Pennsylvania  Railroad. 

Both  freight  and  passenger  charges,  however, 
were  still  maintained  at  an  unprofitable  rate,  and, 
after  the  death  of  John  W.  Garrett,  the  credit  of  the 
Baltimore  and  Ohio  continued  to  decline.  Divi- 
dends were  gradually  reduced  and  by  1888  were 


CROSSING  THE  APPALACHIAN  RANGE  107 
omitted  entirely.  As  is  usually  the  case,  the  cessation 
of  dividends  awakened  the  sleeping  stockholders. 
They  begaa  an  investigation  to  ascertain  the  where- 
abouts of  that  remarkable  surplus  which  had  been 
re|)orted  from  year  to  year  and  which,  according 
to  official  report,  had  shown  a  constant  growth. 

This  investigation  disclosed  a  startling  state  of 
affairs.  Instead  of  a  surplus,  the  company  had 
been  piling  up  deficits  year  after  year,  had  been 
borrowing  money  right  and  left  on  onerous  terms, 
had  been  charging  up  millions  of  dollars  of  expenses 
to  capital  accounts  — and  as  a  matter  of  fact, 
instead  of  making  money,  it  had  for  the  most  part 
been  losing  it.  No>7  the  company  urgently  needed 
cash,  and  the  only  way  it  could  obtain  that  essen- 
tial commodity  was  by  selling  its  express,  telegraph, 
and  sleeping-car  business. 

During  the  entire  administration  of  John  W. 
Garrett,  extending  over  more  than  two  decades, 
( urrent  expenditures  of  enormous  amounts  which 
should  have  been  deducted  from  the  income  had 
been  credited  to  the  surplus;  many  millions  which 
would  never  be  returned  had  been  advanced  to 
subsidiary  lines,  or  had  been  spent,  and  therefore 
should  have  been  put  down  in  the  books  as  losses. 
When  these  facts  became  public,  the  capital  stock 


108  THE  RAILROAD  BUILDERS 

of  the  Baltimore  and  Ohio,  which  for  generations 
had  been  looked  upon  as  one  of  the  most  secure 
of  railroad  investments,  dropped  to  almost  noth- 
ing, and  the  most  strenuous  financial  efforts  were 
required  to  keep  the  company  out  of  bankruptcy. 
These   disclosures,   towards   the  end   of   1887, 
ended  the  first  period  of  active  Garrett  manage- 
ment in  the  Baltimore  and  Ohio.    The  directors 
then  turned  to  New  York  bankers  for  the  cash  that 
was  needed  to  put  the  affairs  of  the  company  on 
a  sound  basis.      Samuel  Spencer,  who  afterward 
became  a  partner  in  the  banking  house  of  J.  P. 
Morgan  and  Company,  was  elected  president  and 
active  manager.   He  introduced  radical  reforms,  en- 
tirely revolutionized  the  organization,  and  adopt- 
ed modern  methods.    He  wrote  ofiP  the  books  a 
large  amount  of  the  much   vaunted   "surplus" 
and  he  took  important  steps  toward  the  general 
improvement  of  the  property. 

Had  the  new  interests  been  allowed  to  continue 
their  efforts  unmolested,  the  history  of  the  Balti- 
more and  Ohio  in  the  next  decade  might  have 
been  very  diflFerent.  But  the  original  controlling 
interests,  the  Garrett  family,  still  held  the  balance 
of  power.  As  the  bad  bookkeeping  and  other  ir- 
regularities of  the  past  naturally  reflected  on  the 


CROSSING  THE  APPALACHIAN  RANGE    109 

Garretts,  it  was  their  interest  to  suppress  further 
investigation  as  far  as  possible;  and  their  antagonis- 
tic attitude  toward  the  policy  adopted  by  the  new 
Sp-ncer  management  was  seen  in  the  annual  elec- 
tion of  directors  in  November,  1888.  Only  five  of 
the  mf  mbers  of  the  board  were  reelected.  President 
Spencer  was  ousted,  and  Charles  J.  Mayer  was 
elected  in  his  place. 

This  second  change  in  management  sidetracked 
the  plans  for  radical  reform,  and  little  improvement 
resulted  either  in  earning  power  or  in  financial  con- 
dition.    The  company  had  fallen  upon  evil  days. 
The  net  profits  did  not  increase,  and  eight  years  after 
1888  they  were  smaller  than  in  that  year,  while  the 
debt  and  interest  charges  constantly  grew.     De- 
spite these  ominous  facts,  dividends  were  paid  regu- 
larly on  the  preferred  stock  and  in  1891  they  were 
resumed   on   the    common  stock.     In  the  latter 
year  a  twenty  per  cent  dividend  was  declared  "to 
compensate  shareholders  for  expenditures  in  bet- 
terments and  improvements  in  the  physical  con- 
dition of  the  property,"  while  at  the  same  time 
tiie  directors  decided  to  raise  five  million  dollars  of 
new  capital  for  expenditures  which  would  be  neces- 
sary to  handle  the  increased  traflBc  created  by  the 
World's  Fair  at  Chicago. 


110  THE  RAILROAD  BUILDERS 

The  traffic  problem  continued  to  be  a  thorn  in 
the  flesh  and  until  1893  freight  rates  were  con- 
stantly  being  cut.    The  opening  of  the  Baltimore 
and  Ohio  connection  to  New  York  had  brought 
keener  competition  from  the  Pennsylvania  Rail- 
road  and  had  made  deep  inroads  into  the  Balti- 
more  and  Ohio  revenues.    Such  conditions  made 
even  the  Garrett  interests  feel  that  something 
should  be  done,  and  in  1890  a  "community  of 
interest"  scheme  was  proposed.     To  control  the 
stock  of  the  Baltimore  and  Ohio  Railroad,  Edward 
R.    Bacon    in    New   York,  acti  ,g   harmoniously 
with  the  Garrett  family,  formed  a  syndicate  of 
capitalists  representing  the  Richmond  Terminal 
system,  the  Philadelphia  and  Reading  Railroad, 
the  Northerr  Pacific  Railroad,  and  other  proper- 
ties.   The  ultimate  plan,  which  proved  too  vision- 
ary,  was  to  consolidate  under  one  control  a  vast 
network  of  lines  extending  all  over  the  continent. 
The  syndicate  had  made  little  progress  toward 
rehabilitation  when  the  panic  of  1893  occurred. 
In  this  year  and  the  next  the  earnings  of  the  Balti- 
more and  Ohio  fell  oflF  rapidly  and  the  dividend 
was  reduced.     Nevertheless,  as  late  as  January. 
1895,  the  directors  insisted  that  financially  the 
company  was  in  better  condition  than  for  several 


CROSSING  THE  APPALACHIAN  RANGE    ill 

years  and  that  on  the  whole  it  was  in  a  stronger 
position  than  at  any  time  since  1880.    But  in  this 
same  year  it  became  necessary  to  stop  all  dividend 
payments;  the  company  began  to  have  difficul- 
ties in  securing  ready  money;  and  before  the  close 
of  the  year  the  situation  seemed  hopeless.    Early 
in  1896  Mayer  tendered  his  resignation,  and  John 
K.  Cowan  succeeded   him.     The  new  president 
<lid  his  utmost  to   obtain   money   to  meet  the 
current  needs,  but  he  was  unsuccessful.     A  re- 
ceivership and  reorganization  seemed  absolutely 
necessary,  and  in  February,  1896,  the  receivership 
was  announced. 

With  the  property  now  in  the  hands  of  the 
courts,  the  o,.portunity  at  last  came  to  make  real 
tlie  reforms  which  had  been  proposed  and  begun 
nearly  a  decade  earlier  under  the  wise  but  quickly 
terminated  administration  of  Samuel  Spencer.    A 
thorough  housecleuning  was  now  carried  through 
without  interference  or  interruption.    A  reorgani- 
zation committee  was  formed,  with  whom  were  de- 
posited the  Garrett  shares  as  well  as  those  of  the 
Morgan  and  New  York  and  Philadelphia  interests. 
A  full  investigation  of  past  management  disclosed 
tliat  the  records  for  the  interim  extending  from 
the  brief  Morgan  control  under  Spencer  to  the 


112  THE  RAILROAD  BUILDERS 

receivership  contained  the  same  kind  of  irregulari- 
ties and  errors  of  policy  that  had  prevailed  under 
the  earlier  Garrett  management.  Statements  of 
profits  had  been  swelled  by  arbitrary  entries  in  the 
books  and  nearly  six  million  dollars  which  had  not 
been  earned  had  been  paid  out  in  dividends.  Fur- 
thermore the  company  had  endorsed  the  notes  of 
certain  subsidiary  roads  to  the  extent  of  over  five 
million  dollars,  and  had  made  no  record  whatever 
of  this  action  for  the  stockholders. 

As  in  the  case  of  numerous  other  railroads,  the 
financial  breakdown  of  the  Baltimore  and  Ohio 
Railroad  was  primh.  'y  due  to  a  bad  or  reckless 
financial  policy,  for  there  was  nothing  inherently 
insecure  in  the  railroad  property  itself.     During 
all  the  years  of  the  Garrett  regime,  the  company 
had  shared  in  the  general  growth  and  expansion 
of  industry,  wealth,  and  population  within  its  terri- 
tory.   It  had  been  progressive  in  matters  of  ex- 
pansion and  had  built  up  its  system  to  meet  the 
needs  of  modern  times.    Its  trackage  and  equip- 
ment compared  favorably  with  similar  systems, 
and  most  of  its  extensions  and  branches  had  been 
wisely  planned  and  had  proved  profitable.    The 
operating  management  of  the  railroad  was  gener- 
ally good  and  it  usually  secured  its  proportion  of 


CROSSING  THE  APPALACHIAN  RANGE    118 

what  business  was  to  be  obtained.  But  the  steady 
increase  in  its  debts  over  a  number  of  years,  its 
extravagance  in  dividend  payments,  and  its  painful 
efforts  to  keep  down  its  operating  expenses  had  so 
weakened  the  property  that,  when  the  hard  times 
of  1893  to  1896  arrived,  it  was  in  no  position 
to  weather  the  storm.  The  only  wonder  is  that 
the  management  succeeded  in  keeping  the  system 
intact  and  apparently  solvent  so  long  as  it  did. 

The  receivership  at  once  adopted  a  vigorous 
policy  of  improvement.  The  rolling  stock  had  run 
down  until  it  could  not  handle  even  ordinary  busi- 
ness. While  the  company  had  been  depleting  its 
credit  and  paying  out  all  its  cash  in  dividends, 
the  equipment  had  been  going  into  the  scrap  heap. 
For  two  years  the  receivers  made  large  expenditures 
on  equipment  and  roadbed,  borrowing  money  for 
this  purpose;  the  result  was  that  when,  in  1898,  the 
courts  surrendered  the  property,  it  was  in  splendid 
condition  to  take  advantage  of  the  tide  of  commer- 
cial and  industrial  prosperity  which  was  just  then 
beginning  to  flow  throughout  the  United  States. 

While  the  reorganization  of  the  Baltimore  and 
Ohio  was  not  so  drastic  as  that  of  many  other 
systems  which  went  through  the  courts  during 
this  period,  it  was  thorough  enough  to  meet  the 


(    f 


114  THE  RAILROAD  BUILDERS 

situation.    The  fixed  charges  were  cut  down  radi" 
cally  and  the  stockholders  were  assessed  in  large 
amounts.     In  all,  more  than  thirty-six  million  dol- 
lars was  raised  by  assessments  and  the  sale  of 
new  securities;  the  liabilities  of  the  Company  were 
greatly  reduced;  and  its  credit  was  promptly  re- 
stored.   Formerly  the  Baltimore  and  Ohio  had  been 
struggling  under  a  burden  of  floating  indebtedness, 
with  so  little  money  in  its  treasury  that  it  could 
not  even  put  a  new  coat  of  paint  on  the  pas- 
senger cars  and  had  to  continue  to  use  oil  lamps 
to  light  some  of  its  best  trains.    But  now  the  float- 
ing debt  was  replaced  by  a  large  available  cash 
capital,  and  as  a  result  of  the  liberal  policy  fol- 
lowed by  the  receivers,  the  equipment  and  roadbed 
were  brought  fully  up  to  the  standards  required  for 
handling  the  traffic  of  the  road  both  economically 
and  effectively. 

With  the  reorganization  of  1898  finished,  the 
Baltimore  and  Ohio  Railroad  entered  a  new  period 
in  its  history.  The  strong,  progressive  interests 
which  now  took  control  concentrated  their  ener- 
gies on  developing  traffic,  increasing  earnings,  and 
rounding  out  the  general  system.  They  adopted 
careful  measures  for  unifying  the  system  by  adding 
other  lines  and  connections  of  value;  they  paid 


CROSSING  THE  APPALACHIAN  RANGE    115 

much  attention  to  the  improvement  and  develop- 
ment of  terminals;  and  they  spent  many  millions  in 
acquiring  and  expanding  the  terminal  properties  of 
the  company  at  Chicago,  St.  Louis,  Philadelphia, 
and  Baltimore. 

The  financial  history  of  the  Baltimore  and  Ohio 
since  the  close  of  the  nineteenth  century  is  inter- 
esting chiefly  in  connection  with  changes  in  the 
control  of  the  property.    After  the  reorganization  a 
group  of  prominent  financiers,  including  Marshall 
Field,  Philip  D.  Ar  nour,  Norman  B.  Ream,  and 
James  J.  Hill  jointly  purchased  a  large  interest  in 
the  stock.    But  this  purchase,  while  perhaps  rep- 
resenting a  dominating  interest,  did  not  involve 
actual  control.     Soon  afterward,  interests  identi- 
fied with  the  Pennsylvania  Railroad  began  to  ap- 
pear in  the  Baltimore  and  Ohio,  and  before  long 
the  Pennsylvania  had  a  strong  representation  on 
the  board.    As  a  consequence,  the  Baltimore  and 
Ohio  almost  lost  its  individuality  and  for  a  time 
was  popularly  regarded  practically  as  a  subsidiary 
of  its  old  rival  line. 

The  purpose  of  the  Pennsylvania  in  obtaining 
this  ascendency  over  the  Baltimore  and  Ohio  was 
to  regulate  the  soft  coal  traflSc.  Already  it  had  ac- 
quired dominating  interests  in  the  Chesapeake  and 


116  THE  RAILROAD  BUILDERS 

Ohio,  the  Norfolk  and  Western,  and  other  soft 
coal  properties.     These  purchases  were  merely 
manifestations  of  that  "community  of  interest" 
policy  which  at  this  time  led  several  large  systems 
to  acquire  interests  in  competing  lines.    Several  of 
the  railroad  leaders  of  that  time,  notably  James  J. 
Hill  and  Edward  H.  Harriman,  believed  that  if  these 
great  systems  actually  owned  large  blocks  of  stock 
in  each  other's  properties,  this  common  associa- 
tion would  ipso  facto  end  the  competition  that,  if 
continued,  would  ultimately  ruin  them  all.    The 
Supreme  Court  had  decided  that  the  "pooling" 
arrangements  which  had  so  long  prevailed  among 
great  competing  roads  violated  the  Sherman  Anti- 
Trust  Act;  and  the  American  public,  which  now 
was  cultivating  a  new  interest  in  railroad  prob- 
lems, believed  that  the  "community  of  interest" 
plan  was  merely  a  scheme  to  defeat  the  Inter- 
state Commerce  Act  and  the  Sherman  Act  and 
to  maintain  secretly  all  the  old  railroad  abuses. 
These  inter-railroad  purchases  therefore  became  so 
unpopular  that  the  Pennsylvania  sold  its  Baltimore 
and  Ohio  stock.    At  this  time  Edward  H.  Harri- 
man of  the  Union  Pacific,  who  had  at  his  disposal 
vast  funds  of  the  latter  property  which  he  had  ob- 
tained by  the  settlement  of  the  Great  Northerp 


CROSSING  THE  APPALACHIAN  RANGE    117 

and  Northern  Pacific  deal,  decided  to  acquire  con- 
trol of  a  system  of  roads  in  the  East  in  order  to 
establish  a  complete  transcontinental  line  in  the 
interest  of  the  Union  Pacific.    It  was  the  theory 
that  such  a  purchase  by  the  Union  Pacific  would 
not  defy  the  law  or  outrage  the  popular  conscience 
because  the  Union  Pacific,  unlike  the  Pennsylvania, 
did  not  compete  with   the  Baltimore  and  Ohio, 
but  was  only  a  western  extension  of  that  system. 
Harriman  in  August,   1906,  therefore  purchased 
nearly  all  the  Pennsylvania  holdings  in  the  old 
(iarrett  property  and  thus  obtained  virtual  control. 
At  this  same  time  the  Baltimore  and  Ohio  had 
boen  developing  a  "community  of  interest"  plan 
on  its  own  account.    In  the  year  1903,  it  acquired 
a  substantial   stock  interest  in  the  newly  reor- 
ganized Reading  Company,  which  controlled  the 
Philadelphia  and  Reading  Railroad  and  the  Phila- 
'lelphia  and  Reading  Coal  and  Iron  Company.    It 
<h(l  not  obtain  a  majority  interest  but,  with  the 
Lake  Shore  and  Michigan  Southern  Railroad  of  the 
Xew  York  Central  system,  it  now  controlled  the 
Reading  system.     The  Reading  Company  mean- 
while had  secured  control  of  the  Central  Railroad 
of  New  Jersey,  over  the  lines  of  which  the  BalU- 
more  and  Ohio  reached  New  York  City. 


118  THE  RAILROAD  BUILDERS 

In  the  following  years  the  Baltimore  and  Ohio 
property  was  still  further  rounded  out  by  pur- 
chasing the  Cincinnati,  Hamilton  and  Dayton,  a 
small  system  of  doubtful  value  radiating  through 
the  State  of  Ohio  and,  by  additional  extensions, 
into  the  soft  coal  fields  of  West  Virginia.  New 
energy  was  put  into  the  expansion  and  improve- 
ment of  the  southwestern  lines  to  St.  Louis,  while 
the  eastern  terminal  properties  were  still  further 
improved. 

The  practical  control  of  the  Baltimore  and  Ohio 
remained  in  the  hands  of  the  Union  Pacific  inter- 
ests until  1913.  In  that  year,  however,  the  Union 
Pacific  liquidated  its  holdings  by  distributing  them 
to  its  own  individual  stockholders  in  the  shape  of 
a  special  dividend.  The  Baltimore  and  Ohio  thus 
became  once  more  an  independent  property. 

The  story  of  the  Baltimore  and  Ohio  for  the 
past  decade  has  been  mainly  a  record  of  a  grow- 
ing, well-managed,  and  efl^cient  business.  It  is 
closely  identified  with  the  personality  of  its  nota- 
ble and  eflicient  president,  Daniel  Willard,  a  con- 
spicuous example  of  the  modern  type  of  railroad 
manager.  In  the  earlier  days  of  railroading,  and 
especially  in  the  long  period  which  came  to  an  end 
with  the  death  of  Harriman,  the  typical  railroad 


CROSSING  THE  APPALACHIAN  RANGE    110 

president  was  usually  a  man  of  great  wealth  who 
had  secured  his  position  by  owning  a  large  financial 
interest  in  the  property.    The  country  was  full  of 
"Wall  Street  Railroad  Generals."     But  in  recent 
years  the  efficient  railroad  head  has  come  more  and 
more  to  be  the  practical  railroad  man  who  has 
risen  from  the  ranks,  who  has  no  important  per- 
sonal financial  interest  in  the  property  but  who  is 
paid  an  adequate  salary  to  operate  a  system  in 
a  purely  businesslike  way.    Notable  examples  of 
this  modern  type  of  railroad  president  are,  be- 
.Mdes  Daniel  Willard,   Edward   P.  Ripley  of  the 
Atchison,  Topeka  and  Santa  Fe,  Benjamin  F.  Bush 
of  the  Missouri  Pacific,  and  Fairfax  Harrison  of  the 
Southern. 

The  efficient  management  of  today  is  abundantly 
shown  in  the  recent  record  of  the  Baltimore  and 
Ohio.     President   Willard    has    been    unmolested 
l>y  financial  interests  and  has  been  continuously 
backed  up  in  his  policies  by  the  owners  of  the  road. 
As  a  result  the  Baltimore  and  Ohio  of  the  present 
flecade  has  reached  .-n  enviable  position  as  one  of 
the  great  Eastern  trunk  lines,  comparing  well  with 
other  progressive  properties  like  the  Pennsylvania, 
the  New  York  Central,  the  Southern,  the  Illinois' 
Central,  and  the  Louisville  and  Nashville.    Mil- 


1«0  THE  RAILROAD  BUILDERS 

lions  have  been  poured  into  the  property  in  the 
past  fifteen  years;  its  main  lines  have  been  large- 
ly rebuilt;  its  rolling  stock  is  chiefly  of  the  most 
modem  types;  and  its  terminals  and  structures 
are  such  as  modern  conditions  demand. 


CHAPTER  VI 


UNKING  THE  OCEANS 

Iv  1862,  when  the  charter  was  granted  by  the 
United  States  Government  for  the  construction 
ot  a  railroad  from  Omaha  to  the  Pacific  coast,  the 
only  States  west  of  the  Mississippi  Valley  in  which 
any  railroad  construction  of  importance  existed 
were  Iowa  and  Missouri.    During  the  three  dec- 
ades which  had  passed  since  the  first  railroad  con- 
struction, the  earlier  methods  of  transportation 
by  boat,  canal,  and  stage  coach  gave  place  in  the 
Eastern  half  of  the  United  States  to  more  modern 
methods  ol  aansportation.    As  a  result  of  these 
new  conditions,  the  States,  cities,  and  towns  were 
welded  together,  and  population  and  prosperity 
increased  rapidly  in  those  inland  sections  which 
had  formerly  languished  because  they  had  no 
means  of  easy  and  rapid  communication. 

The  construction  of  extensive  railways,  how- 
ever, and  particularly  the  consolidation  of  small, 

181 


?*f  . 


1-22  THE  RULROAD  BUILDERS 

experimental  lines  into  large  systems,  dates  from 
the  days  oi  the  disco ver^'  ot  gold  in  California. 
The  nation  did  not  begin  tc  realize  the  extraordi- 
nary possibilities  of  the  vast  ^.Vestem  territory  un- 
til its  attention  was  thus  suddenly  and  definitely 
concentrated  on  the  Pacific  by  the  annual  addi  ion 
of  over  fifty  million  dollars  to  the  circulating  '.e 
dium.  The  wealth  drawn  so  copiously  from  this 
Western  part  of  our  contiuent  had  a  stimulating 
effect  on  the  commerce,  manufactures,  and  trade 
of  the  entire  Eastern  section.  People  began  to 
understand  that  with  the  acquisition  of  California 
the  nation  had  obtained  practically  half  a  conti- 
nent, of  which  the  future  possibilities  were  almost 
unlimited,  so  far  as  the  development  of  natural 
resources  and  the  general  production  of  wealth 
were  concerned. 

The  public  conviction  that  a  railroad  linking 
the  West  and  the  East  was  an  absolute  necessity 
became  so  pronounced  after  the  gold  discoveries 
of  '49  that  Congress  passed  an  act  in  1853  pro- 
viding for  a  survey  of  several  lines  from  the  Mis- 
sissippi to  the  Pacific.  Though  the  published  re- 
ports of  these  surveys  threw  a  flood  of  light  on 
the  intericr  of  the  continent,  they  led  to  no  definite 
result  at  the  time  because  the  rivalry  of  sections 


:*'* 


LINKING  THE  OCEANS  123 

and  groups  of  interests  for  the  selection  of  this  or 
that  route  held  up  all  progress. 

Tne  Act  of  1862,  which  created  the  Union  Pacific 
Railroad  Company,  together  with  the  amending 
Act  of  1864,  authorized  the  construction  of  a  main 
liiie  from  an  initial  point  "on  the  one  hundredth 
nieriflian  of  longitude,"  in  the  Territory  ol  Ne- 
braska to  the  eastern  boundary  of  California,  with 
branch  lines  to  be  constructed  by  other  companies 
and  to  radiate  from  this  initial  point  to  Sioux 
City,  to  Omaha,  to  St.  Joseph,  to  Leavenworth, 
and  to  Kansas  City. '  Provision  was  made  for  a 
subsidy  of  $16,000  a  mile  for  the  level  country 
east  of  the  Rocky  Mountains;  $48,000  a  mile  for 
the  lines  through  mountain  ranges;  and  $83,000 
a  mile  for  the  section  between  the  ranges.  The 
original  plan  to  secure  the  government  subsidies 
by  a  first  mortgage  on  the  lines  was  amended  so  as 
to  allow  private  capital  to  take  the  first  mortgage, 
the  Government  taking  a  second  lien  for  its  ad- 
vances. In  addition  to  these  subsidies  the  several 
companies  were  to  receive  land  grants  of  12,800 
acres  to  the  mile  in  alternate  sections  contiguous 
to  their  Knes.    Upon  the  same  terms  the  Central 


■  These  ambitious  designs  were  oever  fully  realized.   The  main  line 
ran  eventually  west  from  Omaha,  meeting  the  Sioux  City  branch  at 


H4  THE  RAILROAD  BUILDERS 

Pacific,  a  company  incorporated  under  the  laws  of 
California,  was  authorized  to  construct  a  line  from 
the  Pacific  coast,  at  or  near  San  Francisco,  to  meet 
the  Union  Pacific  Railroad. 

The  public  was  quick  to  realize  the  significance 
of  this  huge  enterprise,  for  the  papers  of  the  day 
were  full  of  such  comments  as  the  following: 

It  is  useless  to  enlarge  upon  the  value  and  importance 
of  this  great  work.  It  concerns,  not  the  United  States 
alone,  but  all  mankind.  Its  line  is  coincident  with  the 
natural  and  convenient  route  of  commerce  for  the  world. 
.  .  .  Over  it  the  trip  will  be  made  from  London  to 
Hong  Kong  in  forty  days,  over  a  route  possessing  eveiy 
comfort  and  attraction,  which  takes  a  continent  in  its 
course,  and  which,  from  the  variety  and  magnitude  of 
Its  sources,  from  the  race  which  now  dominates  it,  and 
from  the  extent  of  their  numbers,  wealth  and  produc- 
tions, must  soon  give  law  to  the  commercial  world. 

Notwithstanding  these  and  similarly  optimistic 
sentiments,  the  meager  financial  support  given  to 
the  enterprise  by  the  public  at  large  had  been  very 
discouraging.  Although  the  construction  had  been 
liberally  subsidized  by  the  Government,  gross  ex- 
travagance  had  promptly  crept  in;  juggling  of 
accounts  for  the  purpose  of  securing  profits  on  the 

FWmont.  The  only  other  branch  which  was  constructed  to  connect 
with  the  Union  Pacific  was  that  from  Kansas  City  and  it  ran  first  t» 
Denver. 


LINKING  THE  OCEANS  125 

government  advances  was  freely  indulged  in,  and 
after  only  a  small  section  of  the  line  had  been  com- 
pleted it  was  announced  that  more  capital  must 
be  forthcoming  or  the  work  would  cease.    Out  of 
this  situation  grew  the  plan  for  subletting  the  work 
to  a  construction  company  known  as  the  Penn- 
sylvania Fiscal  Agency  —  a  name  which  was  after- 
wards changed  to  that  of  ths  Credit  Mobilier  of 
America.     The  story  of  the  Credit  Mobilier,  with 
its  irregularities  involving  conspicuous  politicians, 
is  one  of  the  most  disgraceful  in  American  history. 
The  detailed  history  of  these  operations  need  not 
be  considered  here;  it  is  sufficient  to  say  that 
finally,  in  spite  of  political  sc.    dais,  the  Union  Pa- 
cific lines  were  brought  to  completion.   Within  two 
years  after  the  letting  of  the  contracts  to  this  new 
company,  in  1866,  over  five  hundred  miles  of  road 
were  completed  and  in  operation.    An  advertise- 
ment published  late  in  1868  announced  that  "five 
hundred  and  forty  miles  of  the  Union  Pacific  Rail- 
road, running  west  from  Omaha  across  the  con- 
tinent, are  now  completed,  the  track  being  laid 
and  trains  running  within  ten  miles  of  the  Rocky 
Mountains.  .  .  .     The  prospect  that  the  whole 
grand  line  to  the  Pacific  will  be  completed  by  1870 
was  never  better." 


126  THE  RAILROAD  BUILDERS 

As  a  matter  of  fact,  the  line  through  to  the  coast 
was  finished  earlier  than  had  been  predicted.    One 
fact  which        reased  the  rapidity  of  construction 
was  the  growing  financial  difficulty  of  the  coin- 
pany.     It   was   absolutely   imperative   that  the 
through  line  be  completed  in  order  that  the  result 
ing  business  might  make  the  operation  of  trains 
pay.    But  aside  from  this,  another  influence  was  at 
work  to  encourage  rapid  construction     The  Act 
of  1862  provided  that  the  Central  Pacific  might  also 
build  across  Nevada  to  meet  the  Union  Pacific,  on 
condition  that  it  completed  its  own  allotted  sec- 
tion first.    As  the  Central  Pacific  also  was  receiving 
a  heavy  government  subsidy  per  mile,  and  as  there 
was  great  profit  in  construction  undertaken  with 
this  government  subsidy,  there  was  naturally  a 
strong  incentive  for  both  companies  to  build  all 
the  mileage  possible  and  as  rapf  Jly  as  possible. 

The  Central  Pacific  enterprise  was  backed  by 
a  group  of  men  who  were  awake  to  the  possibili- 
ties of  the  situation  and  who  had  made  large  for- 
tunes in  the  gold-mining  boom  of  previous  years, 
such  as  Leland  Stanford,  Collis  P.  Huntington,' 
Mark  Hopkins,  and  the  Crockers.  The  rivalry 
between  them  and  the  Union  Pacific  interests 
woke  the  whole  continent  and  formed  a  chapter  in 


LINKING  THE  OCEANS  127 

American  railroad  history  as  startling  and  romantic 
as  anything  in  the  stories  of  the  Vanderbilts  and 
Goulds  with  their  financial  gymnastics. 

As  the  contest  proceeded,  public  interest  in- 
creased and  the  entire  country  watched  to  see 
which  company  would  win  the  big  government  sub- 
sidies through  the  mountains.     Through  the  win- 
ter of  1868  the  work  continued  on  the  Union  Pacific 
with  unabated  energy,  and  freezing  weather  caught 
the  builders  at  the  base  of  the  Wasatch  Mountains; 
but  blizzards  could  not  stop  them.    The  workmen 
laid  tracks  across  the  Wasatch  on  a  bed  of  snow  and 
ice,  and  one  of  the  track-laying  trains  slid  bodily, 
track  and  all,  off  the  ice  into  a  stream.    The  two 
companies  had  over  twenty  thousand  men  at  work 
:hut  winter.     Suddenly  the  Central  Pacific  sur- 
prised the  Eastern  builders  by  filing  a  map  and 
plans  for  building  as  far  as  Echo,  some  distance 
east  of  Ogden.    The  Union  Pacific  forces,  however, 
were  equal  to  the  occasion.     At  first,  one  mile  a 
day  had  been  considered  rapid  construction,  but 
now,  even  with  the  limited  daylight  of  the  winter 
months,  they  were  laying  over  two  miles  a  day, 
and  they  finally  crowned  their  eflForts  by  laying 
in  one  day  between  sunrise  and  sunset  nearly 
eight  miles  of  track. 


1«8  THE  RAILROAD  BUILDERS 

In  the  meantime  the  Central  Pacific  also  had 
stopped  at  nothing.    The  company  had  a  dozen 
tunnels  to  build  but  did  not  wait  to  finish  them. 
Supplies  were  hauled  over  the  Sierras,  and  the 
work  was  pushed  ahead  regardless  of  expense.    On 
May  10,  1869,  the  junction  was  formed,  the  op- 
posing track  layers  meeting  at  Promontory  Point, 
five  miles  west  of  Ogden,  Utah.    Spikes  of  gold 
and  silver  were  driven  into  the  joining  tracks,  and 
the  through  line  from  the  Missouri  River  to  the  Pa- 
cific Ocean  had  b.en  completed;  the  first  engine 
from  the  Pacific  coast  faced  the  first  engine  from 
the  Atlantic.    The  whole  country,  from  President 
Grant  in  the  White  House  to  the  newsboy  who 
sold  extras,  celebrated  this  achievement.    Chicago 
held  a  parade  several  miles  long;  in  New  York 
City  the  chimes  of  Trinity  were  rung;  and  in  Phila- 
delphia the  old  Liberty  Bell  in  Independence  Hall 
was  tolled  again. 

The  cost  of  the  Union  Pacific  Railroad  from 
Omaha  to  its  junction  with  the  Central  Pacific 
formed  a  subject  of  controversy  for  a  generation. 
The  saving  of  six  months  of  the  allotted  time  for 
completing  the  road  no  doubt  increased  its  cost 
to  the  builders,  for  at  times  they  borrowed  money 
in  the  East  at  rates  as  high  as  18  and  19  per  cent. 


LINKING  THE  OCEANS  129 

Besides,  in  pushing  the  line  far  beyond  tlie  bounds 
of  civilization  without  waiting  for  the  slower  pace 
of  the  settler  and  the  security  which  his  protec- 
tion afforded,  it  often  became  necessary  for  half 
the  total  number  of  workmen  to  stand  guard  and 
thus  reduce  the  working  capacity  of  the  construc- 
tion force.     Even  so,  hundreds  were  killed  by  the 
Indians.      Governmental   restrictions  of  various 
kinds  also  increased  the  cost  of  the  road.     For 
example,  the  stipulation  that  only  American  iron 
should  be  used  increased  the  cost  by  at  least  ten 
dollars  for  every  ton  of  rail  laid.     The  requirement 
that  a  cut  should  be  made  through  each  rise  in  the 
Laramie  plains,  thus  giving  the  track  a  dead  level 
instead  of  conforming  to  the  natural  roll  of  the 
country,  ultimately  resulted  in  a  waste  of  from  five 
to  ten  million  dollars.     Extraordinary  costs  such 
as  these,  combined  with  the  extravagant  meth- 
ods of  construction  and  financing,  brought  the 
total  cost  of  the  property  up  to  what  was  in  those 
(lays  a  fa*^alous  sum  of  money.     The  records  in- 
dicate that  the  profits  which  accrued  through  the 
Credit  Mobilier  and  in  other  ways  in  the  construc- 
tion up  to  the  time  of  the  opening  in  1869  exceeded 
fifty  millions  of  dollars. 
While  the  Union  Pacific  was  being  built,  from 


I'iO  THE  RAILROAD  BUILDERS 

186'^  to  1869,  other  railroads  were  not  idle,  and 
many  were  rapidly  reaching  out  into  the  Central 
West.  Not  only  had  the  Chicago  and  North  West- 
ern reached  Omaha  and  made  connection  with  the 
Union  Pacific,  but  the  Cansas  Pacific  had  pene- 
trated as  far  west  as  Denver  and  had  joined  the 
Union  Pacific  at  Cheyenne. 

The  close  relationship  between  railroad  expan- 
sion and  the  general  development  and  prosperity 
of  the  country  is  nowhere  brought  more  distinctly 
into  relief  than  in  connection  with  the  construc- 
tion of  the  Pacific  railroads.    With  the  opening 
of  a  transcontinental  line  the  vast  El  Dorado  of 
the  West  was  laid  practically  at  the  doorstep  of 
Eastern   capital.     Not  only   did   American   pio- 
neers turn  definitely  toward  the  West,  but  foreign 
emigrants  bent  their  steps  in   vast  numbers  in 
that  direction,  and  capital  in  steadily  increasing 
amounts  made  its  way  there.    Towns  sprang  up 
everywhere  and  soon  developed  into  busy  centers 
of  trade  and  commerce.     Caravan  trains,  which 
a  few  years  before  had  followed  a  single  west- 
ward line,  now  started  from  points  along  the  rail- 
road artery  and  penetrated  far  to  the  north  and 
south.     The  settlers  knew  that  the  time  was  not 
^ar  distant  when  all  the  vast  territory  west  of  the 


LINKING  THE  OCEANS  isi 

Missouri,  from  the  Canadian  border  to  the  Rio 
Grande,  would  be  reached  by  the  rapid  spread  of 
the  railroad.     In  the  sixties  and  seventies  there 
sprang  up  and  rapidly  developed  in  size  and  im- 
portance such  centers  as  Kansas  City,  Sioux  City, 
Denver,   Salt   Lake   City,   Cheyenne,   Atchison, 
Topeka,  Helena,  Portland,  Seattle,  Duluth,  St. 
Paul,  Minneapolis,  and  scores  of  smaller  places. 
The  entire  Pacific  slope  was  soon  dotted  with 
towns  and  cities,  and  even  the  great  arid  plains 
of  the  West  — as  well  as  the  "Great  American 
Desert"  covering  Utah,  /  rizona.  New  Mexico. 
and  parts  of  Nevada  —  began  to  take  on  signs  of 
life  which  had  not  been  dreamed  of  a  decade  before. 
But  the  development  of  this  great  section  of 
the  country  during  the  next  few  years  was  even 
more  notable.    By  1880  four  diflferent  lines  of  rail- 
road  were  running  through  to  the  Pacific  States, 
and  a  fifth,  the  Denver  and  Rio  Grande,  had 
penetrated  through  the  mountains  of  Colorado 
and  across  Utah  to  the  Great  Salt  Lake.    These 
were  the  years  when  the  modern  industrial  era  was 
really  beginning.    Man's  viewpoint  was  changing, 
and  instead  of  remaining  content  with  the  mate- 
rial achievements  of  the  Atlantic  and  Central  sec- 
tions of  the  continent,  he  began  to  reali/e  that  the 


132  THE  RAILROAD  BUILDERS 

vast  Western  regions  and  the  thousand  miles  of  Pa- 
cific  coast  line  were  destined  to  be  America's 
inexhaustible  patrimony  for  the  years  to  come. 

In  1880  the  Union  Pacific  began  its  expansion 
to  the  eastward  and  acquired  control  of  the  Kan- 
sas Pacific,  which  had  come  upon  evil  days,  and 
of  the  Denver  Pacific,  a  most  important  connecting 
link.  In  January,  1880,  these  two  companies  were 
absorbed  by  the  Union  Pacific,  which  thus  obtained 
a  continuous  line  from  St.  Louis  westward.  In 
the  meantime  the  Central  Pacific,  operating  from 
Ogden  west  to  the  coast,  had  added  many  branches, 
while  a  new  company  —  known  as  the  Southern 
Pacific  Railroad  of  California  —  had  for  some 
years  been  constructing  a  system  of  lines  through- 
out that  State  south  of  the  Ccrntral  Pacific  and  by 
1877  had  penetrated  to  Yuma,  Arizona,  727  miles 
southeast  of  San  Francisco.  It  had  also  built  lines 
into  Arizona  and  New  Mexico  and  soon  joined  the 
Santa  Fe  route,  which  had  for  some  time  been 
working  westward. 

During  1881  the  Southern  Pacific  continued  its 
eastern  extensions  along  the  Rio  Grande  to  El 
Paso,  Texas,  where  it  formed  a  connection  with 
a  new  road  under  construction  from  New  Orleans. 
A  junction  was  also  made  at  £1  Paso  with  the 


UNKING  THE  OCEANS  ISS 

Mexican  Central,  which  was  under  construction 
to  the  City  of  Mexico.  The  Southern  Pacific 
Railroad  was  closely  allied  with  the  Central  Pacific 
interests  ht .  led  by  Collis  P.  Huntington,  and  in 
1884  the  great  Southern  Pacific  Company  was 
formed,  which  acquired  stock  control  of  the  entire 
aggregation  of  railroads  in  the  South  and  South- 
west. At  the  same  time  the  Central  Pacific  came 
under  direct  control  of  the  Southern  Pacific 
through  a  long  lease. 

During  these  eventful  years,  while  the  South- 
ern Pacific  properties  were  penetrating  eastward 
through  the  broad  stretches  of  country  to  the 
south  of  the  Union  Pacific  lines,  equally  interesting 
events  were  occurring  in  the  north.     In  1879  a 
consolidation  was  formed  of  the  Oregon  Steam- 
ship and  Navigation  Company  with  several  short 
railway  lines  in  Oregon  and  Washington,  under 
the  name  of  the  Oregon  Railway  and  Navigation 
Company.      These   railroad   lines   extended   east 
from  Portland  to  the  Oregon  state  line,  and  north 
to  Spokane,   and  they  finally  made  connection 
with  the  new  Northern  Pacific.    At  the  same  time, 
another  road,  known  as  the  Oregon  Short  Line 
Railroad,    was    built   from    Granger,    Wyoming, 
on  the  line  of  the  Union  Pacific  to  a  junction  with 


VM  THE  RAIIJlOAr)  BfJILDERS 

the  Oregon  Railway  and  Xavipation  Company  at 
Huntington,  Oregon,  on  the  Snake  River.  The 
Oregon  Short  Line  came  under  the  control  of  the 
Union  Pacific  and  was  opened  for  Iraffio  in  1881. 
Later  a  clo.se  alliance  was  made  with  Henry  Vil- 
lard,  the  controlling  spirit  in  the  Oregon  Railway 
and  Navigation  Company.  Ultimately  the  entire 
system  of  Oregon  lines  passed  under  Union  Pacific 
control,  to  be  lost  in  the  receivership  of  189.S,  but 
later  recovered  under  the  Harriman  regime. 

When,  after  ten  more  years  of  expansion,  the 
great  Union  Pacific  property  went  into  the  hands 
of  receivers  in  18}).S,  it  had  grown  to  a  system  of 
more  than  8000  miles.  It  completely  controlled 
the  Oregon  railway  and  steamship  lines,  the  lines 
to  St.  Louis,  and  also  an  important  extension 
known  as  the  T^nion  Pacific,  Denver  and  Gulf 
Railroad,  running  from  a  point  in  Wyoming  across 
Colorado  to  Fort  Worth,  Texas.  The  financial 
failure  of  the  system  was  due  to  a  variety  of  causes. 
Its  management  had  been  extravagant  and  ia- 
efiicient,  and  construction  and  expansion  had  been 
too  rapid.  The  policy  of  building  expensive  branch 
lines  where  they  were  not  needed  and  of  obligat- 
ing the  parent  company  to  finance  them  had  been 
a  grievous  mistake  and  had  contributed  largely  to 


UNKING  THE  OCEANS  135 

the  downfall  of  the  company.     Further  than  this, 
the  credit  ol    he  Union  Pacific  was  steadily  growing 
weaker  because  the  time  was  drawing  near  when 
'ts  heavy  debt  to  the  United  States  Government 
would  fall  due.     In  all  its  history  of  more  than 
twenty  years  the  company  had  never  paid  any 
interest  on  the  government  debt  nor  had  it  main- 
tained a  sinking  fund  to  meet  the  principal  when 
due.      Consequently,    the   accruing  interest   had 
mounted  year  by  year  and,  should  the  Govern- 
ment enforce  paj-ment  at  maturity  in  1897-99, 
the  company  would  be  doomed  to  bankruptcy. 
This  government  debt,  including  accrued  interest, 
amounted  to  the  sum  of  $54,000,000. 

Attention  should  not,  however,  be  diverted  from 
the  fact  that  during  all  these  years  a  vast  expan- 
sion of  competitive  lines  had  been  going  on  far 
southward  of  the  Union  Pacific.    Under  the  guid- 
ing genius  of  Collis  P.  Huntington,  the  Southern 
Pacific  Company  in   1884  had  consolidated  and 
solidified  a  gigantic  system  of  railways  extending 
from  New  Orleans  to  the  Pacific  and  throughout 
the  entire  State  of  California  to  Portland,  Oregon, 
with  branch  lines  radiating  through  Texas  and 
making  close  connection  with  roads  entering  St. 
Louis.    In  addition  to  these  railroads,  Huntington 


130  THE  RAILROAD  BUILDERS 

acquired  control  of  a  steamship  line  operating  from 
New  York  to  New  Orleans  and  Galveston,  and 
subsequently  of  the  Pacific  Mail  Steamship  Com- 
pany, operating  along  the  coast  from  Oregon  south 
to  the  Isthmus  of  Panama  and  across  the  Pacific 
Ocean.  The  ever-growing  effects  of  this  power- 
ful and  well-managed  competitor  —  combined  with 
the  large  development  of  the  Santa  Fe  system 
during  these  years,  the  competition  of  the  com- 
pleted Northern  Pacific,  and  the  possibilities  of 
the  new  Great  Northern  Railway  or  Hill  line,  now 
completing  its  main  artery  to  the  Pacific  —  were 
far-reaching  enough  in  themselves  to  bring  the 
Union  Pacific  upon  evil  days.  Consequently  few 
were  surprised  when,  under  the  great  pressure  of 
the  panic  of  1893,  the  property  was  forced  to 
confess  insolvency.  The  Union  Pacific  had  simply 
repeated  the  story  of  most  American  railroads;  it 
had  been  constructed  in  advance  of  population 
and  had  to  pay  the  penalty.  Yet  it  had  more  than 
justified  the  hopes  of  the  daring  spirits  who  pro- 
jected it.  It  may  have  made  individuals  bank' 
rupt,  but  it  magnificently  fulfilled  the  part  which 
it  was  expecled  to  play.  It  had  opened  up  mil- 
lions of  acres  to  cultivation,  given  homesteads  to 
millions  of  people,  many  of  whom  were  immigrants 


LINKING  THE  OCEANS  187 

from  Europe,  developed  mineral  lands  of  inca*.  u- 
lable  value,  created  several  new  great  States,  and 
made  the  American  nation  a  unified  whole.  Its 
subsequent  history  belongs  to  another  chapter  of 
this  story  —  a  historj>  that  is  richer  than  the  first 
in  the  matter  of  financial  success  but  that  can 
never  surpass  the  early  pioneering  years  in  real 
and  permanent  achievement. 


CHAPTER  VII 


PENETRATING  THE  PACIFIC  NORTHWEST 

It  is  only  when  one  reads  such  a  book  as  Francis* 
Parkman's  Oregon  Trail  that  one  fully  realizes  the 
vas-  transformation  which  has  taken  place  within 
little  more  than  half  a  century  in  the  great  North- 
western territory  beyond  the  Mississippi  and  the 
Missouri.    In  that  fascinating  history  we  read  of 
the  romantic  and  thrilling  experiences  of  Parkman 
and  his  companions  in  their  summer  journey  across 
the  plains  of  Nebraska  and  through  the  mountain 
ranges  of  Wyoming,  Montana,  and  Oregon.    We 
read  of  their  hairbreadth  escapes  from  the  Indians; 
their  chase  of  the  buffalo  and  other  wild  animals 
of  the  far  Western  country;  of  the  wearisome  weeks 
that  they  spent  in  crossing  the  deserts  where  ab- 
solute loneliness  reigned;  and  finally  of  their  arri- 
val, after  months  of  hardship,  in  the  vast  Oregon 
country,  which  with  its  great  natural  resources, 
splendid  climate,  and  large  extent  has  come  to  be 

1S8 


THE  PACIFIC  NORTHWEST  139 

known  in  these  modern  days  as  the  Empire  of 
the  Northwest, 

It  was  to  penetrate  and  bring  this  great  virgin 
region  within  reach  of  the  East  that  the  Northern 
Pacific  Railroad  Company  was  chartered  by  Con- 
gress in  1864,  just  prior  to  the  closing  of  the  Civil 
War.  During  this  same  period  the  Union  Pacific 
route  was  being  surveyed,  and  the  first  ground  was 
broken  in  December,  1863,  for  the  line  which  was 
later  to  connect  Omaha  with  San  Francisco. 

Like   the  Union  Pacific  charter,   that  of  the 
Northern  Pacific  also  contained  an  extensive  land 
grant.     From  the  modern  viewpoint,  such  land 
grants  look  colossal,  but  in  those  days  the  general 
opening  up  and  development  of  the  Western  coun- 
try  had  progressed  to  so  slight  an  extent  that  the 
significance  of  giving  away  millions  of  acres  of  the 
public  lands  to  encourage  a  precarious  railroad  en- 
terprise was  then  no  more  than  the  passing  over 
to  capitalists  today  of  exclusive  rights  in  extensive 
tracts  of  territory  in  Brazil  and  the  other  South 
American  Republics.     Even  these  great  opportu- 
nities  to  acquire  almost  an  empire  of  fertile  lands 
or  rich  forests  were  not  as  a  rule  looked  upon 
as  attractive  enough  to  tempt  capital  into  the  wil- 
demess.     The  old  saying  that  capital  is  the  most 


140  THE  RAn.ROAD  BUILDERS 

timid  thing  in  the  world  and  does  not  like  pio- 
neering  is  strongly  emphasized  by  such  instances 
as  this,  and  no  doubt  in  1864  the  enormous  grants 
of  free  land  made  by  Congress  did  not  appear 
especially  attractive  to  the  man  who  had  money 
to  invest. 

Whatever  the  public  attitude  may  have  been, 
the  Act  of  Congress  of  July  2,  1864,  creating  the 
Northern  Pacific  Railroad,  gave  that  Company 
the  right  to  construct  a  line  from  some  point  on 
Lake  Superior,  either  in  Minnesota  or  in  Wiscon- 
sin, westward  and  north  of  latitude  4."°,  to  or  near 
Portland,  Oregon.  The  land  grant  consisted  of 
forty  alternate  sections  of  public  land  for  each  mile 
within  the  Territories  penetrated  and  twenty  al- 
ternate sections  within  the  States  through  which 
the  railroad  might  pass. 

The  hazardous  character  of  this  undertaking 
will  be  realized  when  it  is  remembered  that  at  this 
time  no  railroad  had  yet  penetrated  the  Rocky 
Mountains;  that  the  entire  railroad  system  of  the 
United  States  was  less  than  40,000  miles;  and 
that  west  of  the  Mississippi  there  was  no  mileage 
worth  mentioning.  It  was  still  less  than  a  genera- 
tion since  Parkman  and  his  companions  had  made 
their  four  months'  journey  from  St.  Louis  to  the 


THE  PACIFIC  NORTHWEST  I4i 

mouth  of  the  Columbia  River,  and  between  the 
fringe  of  civihzation  along  the  Pacific  slope  and 
the  region  about  Chicago  and  St.  Louis  lay  almost 
a  third  of  the  continent  uninhabited,  undeveloped, 
and  unknown.  The  scheme  languished  for  several 
years  until  finally,  in  1869,  the  firm  of  Jay  Cooke 
and  Company  of  Philadelphia  undertook  to  raise 
the  necessary  capital. 

The  story  of  the  Northern  Pacific  for  the  next 
few  years  was  closely  bound  up  with  that  of  Jay 
Cooke,  who  was  one  of  the  most  conspicuous  char- 
acters of  his  time  in  the  financial  world.    He  was 
u  man  of  commanding  personality,  great  energy, 
unusual  resourcefulness,  and  with  a  large  personal 
following.   He  had  built  his  reputation  through  his 
great  success  in  financing  United  States  govem- 
iiient  loans  during  the  Civil  War.     He  now  un- 
dertook to  raise  more  than  one  hundred  million 
dollars  to  carry  through  the  Northern  Pacific  en- 
terprise.    He  achieved  remarkable  success  for  a 
time  and  within  three  years  had  built  over  five 
hundred  miles  of  the  main  line  to  the  Pacific  coast. 
But  the  outbreak  of  the  Franco-Prussian  War  and 
the  consequent  financial  stringency  abroad,  the 
difficulty  of  marketing  bonds  on  an  uncompleted 
enterprise,  combined  with  the  poor  showing  made 


14id  THE  RAILROAD  BUILDERS 

by  those  sections  of  the  line  completed  and  in  oper- 
ation,  brought  matters  to  a  crisis,  and  in  Septem- 
ber, 1873,  Jay  Cooke  and  Company  were  obhged 
to  close  their  doors.  The  affairs  of  the  railroad 
were  so  closely  involved  with  those  of  the  bank- 
mg  firm  that,  although  strenuous  efforts  were 
adopted  to  save  the  railroad,  its  revenues  were 
inadequate.  As  a  result,  in  April,  1874,  General 
Lewis  Cass  was  appointed  receiver. 

The  uncompleted  property  was  operated  for 
some  years  thereafter  under  the  protection  of  the 
courts  and  no  plan  of  reorganization  was  devised 
until  1879.    During  the  receivership  only  a  moder- 
ate amount  of  additional  mileage  was  constructed, 
and  it  was  not  until  many  years  had  passed  that 
the  system  penetrated  the  mountains  and  reached 
the  Pacific  coast.     But  when  the  new  company 
took  possession  in  1879,  aggressive  building  was 
resumed,  and  for  a  time  it  looked  as  though  the 
project  would  be  promptly  finished.     However, 
in  1882,  the  company  still  had  about  one  thou- 
sand miles  to  construct  in  order  to  complete  its 
main  artery.     At  this  time  financial   difl5culties 
appeared,  and  the  days  of  stress  were  tided  over 
only  by  the  help  of  a  syndicate  and  the  Oregon  and 
Transcontinental  Company. 


THE  PACIFIC  NORTHWEST  143 

With  the  formation  of  the  Oregon  and  Trans- 
continental  Company  begins  the  i^gime  of  Henry 
Villard,  the  dominating  factor  in  Northern  Pacific 
affairs  for  many  years  afterward.     Some  years 
before,  Villard,  who  had  long  been  interested  in 
Western  railroad  enterprises  and  who  had  become 
prominent  through  his  activities  in  connection 
with  the  Kansas  and  Pacific  Railway,  had  sue 
ceeded  m  forming  the  Oregon  Railway  and  Navi- 
gation  Company  as  a  combination  of  steamboat 
lines  operating  on  the  Willamette  and  Columbia 
nvers  in  Oregon,  with  an  ocean  line  connecting 
Portland  and  San  Francisco.    A  connecting  rail- 
road  line,  which  had  been  built  to  Walla  Walla  in 
southeastern  Washington,  penetrated  a  portion  of 
the  territory  through  which  the  Northern  Pacific 
was  projected.    In  1880  a  contract  was  arranged 
between  the  two  companies  whereby  the  Oregon 
Railway  and  Navigation  Company,  in  order  to 
share  in  the  traffic,  undertook  to  construct  a  line 
eastward  to  meet  the  Northern  Pacific  line  at  the 
mouth  of  the  Snake  River.     This  arrangement 
would  allow  the  Northern  Pacific  to  run  its  trains 
mto  Portland  and  would  obviate  the  necessity  of 
constructing  its  own  road  into  that  city. 
In  spite  of  this  arrangement,  Villard  feared  that 


144  THE  RAILROAD  BUILDERS 

the  Northern  Pacific  Company  might  decide,  after 
all,  to  build  its  own  line  to  Portland  as  soon  as  it 
was  able  to  finance  the  project.    It  was  for  the 
purpose  of  preventing  this  move  that  he  formed 
the  Oregon  and  Transcontinental  Company,  a  hold- 
ing corporation  which  promptly  acquired,  in  the 
open  market  and  by  private  purchases,  a  domi- 
nating  interest  in  the  Northern  Pacific  Railroad. 
At  the  same  time  Villard  placed  the  control  of  the 
Oregon  Railroad  and  Navigation  Company  in  the 
hands  of  the  new  Transcontinental. 

Villard  thus  came  to  control  the  entire  North- 
ern Pacific  system  and,  backed  by  the  Deutsche 
Bank  of  Berlin  and  other  German  and  Dutch  in- 
terests, at  once  began  an  aggressive  policy  of  ex- 
pansion and  development.  The  business  of  the  sys- 
tem developed  rapidly.  The  main  line  through  to 
the  Pacific  coast  was  now  in  operation,  and  the  en- 
tire system  amounted  to  about  2300  miles  of  road. 
But  Villard  followed  a  financial  policy  which  was 
not  sound  and  paid  dividends  without  justification. 
In  a  short  time  the  company  consequently  found 
itself  financially  embarrassed. 

As  a  result  of  financial  losses  in  1884,  Villard  was 
obliged  to  retire  from  active  control  of  the  prop- 
erties.   But  in  1887  he  once  more  got  possession 


THE  PACIFIC  NORTHWEST  145 

of  the  Northern  Pacific  with  German  capital  and 
succeeded  in  arranging  a  lease  of  the  Oregon 
Short  Line,  which  had  been  developed  by  the  Union 
Pacific  interests,  embracing  a  cross^rountry  road 
from  Its  main  lines  in  Wyoming  northward  into 
Oregon  and  Washington.   At  the  same  time  the  in- 
terest  of  the  Transcontinental  Company  in  the 
Oregon  Railway  and  Navigation  Company  was 
hnked  with  the  Oregon  Short  Line  Company. 
These  transactions,  however,  still  left  the  Trans- 
continental Company  in  control  of  the  situation 
as  it  retained  its  majority  ownership  of  Northern* 
Pacific  Railroad  stock. 

For  the  next  few  years  the  Northern  Pacific 
did  not  follow  a  policy  of  rapid  expansion.    Other 
trunk  Imes,  such  as  the  Union  Pacific.  Rock  Island. 
Santa  Fe.  Burlington,  and  North  Western,  were  all 
growing  and  keeping  pace  with  the  rapid  settle- 
ment  of  the  West;  but  the  Northern  Pacific  in  these 
years  simply  rested  content  with  its  position  as 
a  single  track  transcontinental  route  having  but 
few  branches.    Its  only  important  extension  was 
made  by  acquiring  the  Wisconsin  Central  Railroad, 
which  gave  the  company  a  line  between  St.  Paul 
and  Chicago  and  a  valuable  and  important  en- 
trance  mto  the  latter  city.    It  was  expected  that. 


146  THE  RAILROAD  BUILDERS 

with  this  accession,  the  affairs  of  the  company 
would  be  permanently  established  on  a  sound  basis, 
but  the  overliberal  policy  of  paying  out  practically 
all  the  surplus  in  dividends  was  continued  in  the 
face  of  large  increases  in  fixed  charges. 

Early  in  1892  it  began  to  be  rumored  that  the 
Northern  Pacific  was  not  in  so  easy  a  financial 
position  as  had  been  assumed.    The  stockholders 
took  alarm;  and  the  committee  which  was  ap- 
pointed to  investigate  the  situation  discovered  a 
deplorable  state  of  affairs.    As  a  result  of  the  severe 
criticism  of  Villard'spolicy ,  steps  were  at  once  taken 
to  oust  him  from  control,  but  without  success  un- 
til June,  1893.    Two  months  later,  receivers  were 
appointed  who  discovered  that  the  company  was 
insolvent  and  had  no  funds  to  pay  quickly  matur- 
ing obligations.      Receivers  were  appointed  also 
for  most  of  the  branch  lines,  including  the  Wiscon- 
sin  Central  system.    The  Oregon  Short  Line,  which 
was  tied    through   guarantees   with   the  Union 
Pacific  although  leased  to  the  Northern  Pacific, 
was  involved  in  the  general  crash  but  was  later 
separately  reorganized. 

To  rehabilitate  the  Northern  Pacific  Railroad 
effectively  was  a  difficult  problem.  Its  debt  was 
enormous;  its  roadbed  and  rolling  stock  had  been 


THE  PACIFIC  NORTHWEST  ,47 

neglected:  and.  a,  a  result  of  the  recent  crash,  it, 
valuable  feeder,  on  both  east  and  west,  the  wl 
consin  Central  and  the  Oregon  properties,  we" 
removed  from  its  control.  Besides  these  adve«^ 
cond.t,ons.  competition  of  a  serious  nature  w"s 
oommg  up.    James  J.  Hill  had  for  many  years 

^.metly  developing  the  Great  Nor«.e™S 

yy.    This  great  system  he  had  financed  in  an  ex- 

emely  conservative  manner;  he  had  extended  I 

ow   and  he  had  secured  control  of  branches  and 
feeders  which  might  have  come  under  the  sway  „f 

farsighted.     H.ll  had  operated  his  road  from  the 
.«h;  and  even  in  the  period  of  financial  depr^Ltn 

»t.efieid.tr.aiiy,ooSfo::::;;?:rurht: 

»ard  D.  Adams,  representing  New  York  inter- 
\T  ""'  ""'*  •"  ""^  ^-'-he  Bank  of  Brrin 

ern  Radroad  Company:  the  old  stock  and  bond 
bolder  were  to  makeallthesacrifices  and  tosuppt 


148  THE  RAILROAD  BUILDERS 

all  the  new  capital,  and  the  Great  Northern  was 
then  to  he  presented  with  half  the  stock  of  the  new 
company,  in  consideration  for  which  it  was  to 
guarantee  the  new  Northern  Pacific  bonds.    The 
situation  was  somewhat  simila:  to  that  which  ex- 
isted in  New  York  State  as  early  as  1868  when  Com- 
modore Vanderbilt  had  achieved  his  great  reputa- 
tion as  a  wizard  at  railroading  by  acquiring  the 
Harlem  and  Hudson  River  railroads  and  by  forc- 
ing the  New  York  Central  lines  to  terms.    James  J. 
Hill  had  become  a  modern  wizard,  and  the  only 
hope  for  the  Northern  Pacific  seemed  to  be  to  lay 
the  road  at  his  feet  and  ask  him  to  do  with  it  what 
he  had  done  with  the  Great  Northern  —  make  it  a 
"gold  mine." 

This  plan,  however,  met  with  too  much  opposi- 
tion and  was  abandoned.  During  the  following 
year  a  new  plan,  backed  by  both  the  American 
and  the  German  interests,  secured  the  strong  co- 
operation and  endorsement  of  J.  P.  Morgan  and 
Company.  This  was  the  first  instance  of  Morgan's 
entry  into  railroad  reorganization  in  the  West. 
During  the  previous  few  years  he  had  been  increas- 
ing his  reputation  as  a  reorganizer  of  Eastern  rail- 
road properties,  and  by  this  time  he  had  success- 
fully organized  or  was  rehabilitating  the  Erie,  the 


THE  PACIFIC  NORTHWEST  ,49 

clear  of  ":Kf::^t'-  ^f  "'""""'''" 
refused  t„  ~!  '*'  ""''  '""'  definitely 

refused  to  reorganize  the  Union  Pacific  on  th, 

was  carried  out  witi,  no  regard  to  Zu^!^. 

'he  old  stockholde,.   3  hi"       '        ""'^^ 

bondholder  were  for^IT         I'    '"''^"''=  "" 
15  were  forced  to  make  sacrifices-  (K. 

Wisconsin  Central  line,  were  entireltl  ! 

While  the  new  Nopfhc^  u     v 
in  .898  ca..e  direc^^- tdTr  W         "  ""'^""■^"' 
-.  immediately  classed  I  ^X^r"'"' ''"•' 

jl^did  not  .main  e«l„sivei;su!rrv:7C 
In  the  promotion  and  development  of  the  gZ" 

--  -elations  with  the  Mor^ri"  t^Z 


150  THE  RAILROAD  BUILDERS 

he-'  V  interested  in  the  First  National  Bank  of 
i\t*v  York,  an  institution  which  for  many  years 
had  been  more  or  less  directly  identified  with  the 
Morgan  interests.  On  more  than  one  occasion 
thereafter  the  banking  firm  of  J.  P.  Morgan  and 
Company  acted  as  financial  agent  for  the  Great 
Northern. 

Soon  after  the  reorganization  of  the  Northern 
Pacific,  it  became  known  that  Hill  had  acquired 
an  important  interest  in  the  property,  and  as  time 
went  on  this  interest  was  substantially  increased. 
Within  a  year  or  two  the  Northern  Pacific  began 
to  be  classed  as  one  of  the  Hill  hnes.  With  a  sub- 
stantial Hill  representation  on  the  board  of  directors 
and  a  managerial  policy  which  was  clearly  in^  red 
by  Hill,  the  company  now  entered  upon  a  new  stage 
in  its  career. 

The  outstanding  dramatic  event  in  the  story  of 
the  modern  Northern  Pacific  was  the  famous  cor- 
ner which  occurred  in  the  spring  of  1901  as  a  result 
of  a  contest  between  the  Hill  and  the  Harriman 
interests  for  the  control  of  the  property.  The  de- 
tails of  this  operation,  which  sent  the  price  of 
Northern  Pacific  stock  up  to  $1000  a  share  and 
precipitated  a  stock-market  panic,  form  part  of  the 
story  of  the  Harriman  lines.     The  contest  resulted 


THE  PACIFIC  NORTHWEST  15, 

in  the  formation  of  the  Northern  Securities  Com- 
^any  a  corporation  of  $400,000,000  capital,  devised 

the  H  II  and  Harnman  interests,  for  the  purpose  of 
reta.n,ng  a  majority  of  the  stocks  of  the  Northl™ 
Pacific  and  the  Great  Northern 

The  Hill  interests,  jointly  with  the  Morgan  «,„- 
'""'  "' ,'  .^  ^"rthern  Pacific,  had  been  quiX 
a«umulat.„g  stock  in  the  Chicago.  Burhngton 
nd   Qumcy  Ra,l,„ad.  and   Harriman  felt   tC 
here  was  grave  danger  to  the  Union  Pacific  Tn 
'":  7°7'  -^  "'«'  B-«"gton  had  alreadv  pene" 
.  uted  ,„to  the  Union  Pacific  territory  and  mi^t 
t  any  ^me  start  to  build  through  to  the  coLt 
.Is  own  hue  parallel  to  the  Union  Pacific.     Ham 
J..un  consequently   began   to   buy   up  Northern 
Pacific  stock  u.  the  open  market  and  thus,  together 
w.th  the  efforts  of  the  Hill  and  Morgan  p4llt 

.ta.^a„d  strengthen  their  cont.1.  bought  alut 

The  Northern  Securities  Company  was  designed 

harmomze  all  .nterests  and  to  keep  the  control 

of  the  Burhngton  pn>perty  jointly  in  the  hands  of 

HarnmanandHil,    Butasthe^sultofasuitunde 

f  7"'-.,  Ant.-Trust  Act,  this  combination 

»a.  declared  illegal,  and  in  1904  the.ompany  wa.s 


162  THE  RAILROAD  BUILDERS 

dissolved.  The  final  outcome  of  the  situation  was 
that  the  Northern  Pacific,  sharing  with  the  Great 
Northern  the  joint  control  of  the  Burlington  lines, 
was  left  indisputably  in  the  hands  of  the  Hill- 
Morgan  group,  whe  e  it  has  ever  since  remained. 
These  three  great  railroad  systems,  the  Northern 
Pacific,  the  Great  Northern,  and  the  Chicago,  Bur- 
Ungton  and  Quincy,  constituting  nearly  twenty 
thousand  miles  of  railroad,  have  been  known  ever 
since  as  Hill  lines. 

Since  the  dramatic  days  of  the  Harriman-Hill 
contest  the  histoiy  of  the  Northern  Pacific  system 
has  been  simply  a  striking  reflection  of  the  growth 
in  population  and  wealth  of  the  great  Northwest. 
The  States  through  which  it  operates  have  grown 
with  astounding  rapidity  during  the  past  two  dec- 
ades; small  cities  have  spread  into  great  centers  of 
manufacture  and  trade;  hundreds  of  smaller  towns 
have  sprung  up;  natural  resources  of  untold  value 
have  been  developed.  In  the  meanwhile  the  North- 
em  Pacific  has  forged  ahead  in  its  earnings  and 
profits,  and  the  stock  of  the  road  has  come  to  be 
known  as  one  of  the  highest  class  of  investment 
issues.  Although  new  competition  appeared,  in  both 
the  local  and  the  through  business  of  the  c  ompany 
—  notably  by  the  extension  of  the  St.  Paul  svst< -^ 


THE  PACIFIC  NORTHWEST  153 

^rgely  through  Northern  Pacific  territory  to  the 
Puget  Sound  region -the  superior  modem  busi- 
ness  management  of  James  J.  Hill,  backed  by  the 
strong  resources  of  the  Morgan  banking  interests, 
made  the  Northern  Pacific  one  of  the  standard 
railroad  systems  01  Amenca. 


CHAPTER  Vni 

BUILDING   ALONG    THE   SANTA   FE  TRAIL 

The  Santa  Fe  Route,  or  the  Atchison,  Topeka  and 
Santa  Fe  Railroad,  which  has  in  modern  times 
developed  into  one  of  the  largest  and  most  profit- 
able railroad  systems  in  this  country,  was  pro- 
jected long  before  the  idea  of  a  transcontinental 
line  to  the  Pacific  coast  had  taken  full  possession 
of  men's  minds.     As  early  as  1858  a  plan  was 
worked  out  for  the  construction  of  a  line  of  about 
forty  miles  within  the  State  of  Kansas  to  connect 
what   were  then   the  obscure  and  unimportant 
townships  of  Atchison  and  Topeka.    At  that  time 
not  a  mile  of  railroad  had  been  built  in  Kansas 
or  in  any  Territory  west  of  that  State,  except  on 
the  Pacific  coast,  to  which  there  had  been  an  enor- 
mous immigration  occasioned  by  the  wonderful 
discovery  of  gold. 

The   outbreak  of  the  Civil  War  delayed  the 
undertaking  of    the  Atchison-Topeka  line,    and 

154 


HUILDING  ALONG  THE  SANTA  FE  TRAIL  155 

nothing  more  was  done  until  1863.  In  that  year 
new  interests  took  control  of  the  enterprise  and 
acquired  rights  for  its  extension  through  south- 
western Kansas  in  the  direction  of  Santa  Fe,  the 
capital  of  the  Territory  of  New  Mexico.  The  com- 
pany, which  had  originally  been  the  Atchison  and 
Topeka,  now  changed  its  name  to  the  Atchison, 
Topeka  and  Santa  Fe  and  obtained  from  the  Gov- 
ernment a  very  valuable  land  grant  of  6400  acres 
for  every  mile  constructed,  the  only  condition  being 
that  within  ten  years  the  line  should  be  completed 
from  Atchison  to  the  western  border  of  Kansas. 
The  plan  involved  the  building  of  only  470  miles 
of  road,  which  when  finished  would  assure  the 
company  nearly  three  million  acres  of  land  within 
the  State  of  Kansas. 

A  decade  would  seem  to  be  ample  time  for  the 
construction  of  this  comparatively  short  railroad, 
particularly  with  the  inducement  of  so  extraordi- 
nary a  land  grant.  Not  only  the  Union  Pacific 
but  the  Central  Pacific  and  Kansas  Pacific  —  all 
built  within  this  decade  —  had  to  accomplish  far 
more  construction  in  order  to  secure  their  respec- 
tive grants,  and  yet  they  had  their  complete  lines 
in  operation  years  before  the  Santa  F6  had  fifty 
miles  of  track  in  actual  commission.    The  reason 


156  THE  RAILROAD  BUILDERS 

for  this  delay  was  of  course  a  financial  one. 


The 


other  roads  had  all  received  government  aid  in 
cash  or  securities  in  addition  to  land  grants.  But 
the  Atchison  line  was,  from  the  start,  thrown  on  its 
own  resources  in  raising  capital,  and  it  was  not 
until  late  in  1869  —  nearly  a  year  after  the  opening 
of  the  Union  Pacific  to  the  coast  —  that  any  con- 
struction work  whatever  was  done.  In  that  year 
the  section  from  Topeka  to  Burlingame,  consisting 
of  about  twenty-eight  miles,  was  opened  for  trafific, 
and  a  year  later  the  extension  to  Emporia  was 
finished,  thus  making  a  total  of  sixty-one  miles 
under  operation. 

The  terms  of  the  land  grant  provided  that  the 
entire  line  across  Kansas  should  be  completed  by 
June,  1873.  When  by  1872  only  sixty-one  miles  of 
track  had  been  built,  the  company  still  had  over 
four  hundred  miles  to  go  within  ten  months  if  it 
expected  to  obtain  the  land  grant.  But  so  ener- 
getically did  the  owners  of  the  property  work  from 
that  time  on  that  within  seven  months  they  had 
reached  the  eastern  boundary  of  Colorado  and  had 
thus  saved  the  grant. 

But  like  most  of  the  Western  railroads  built  in 
those  early  days  the  Santa  F^  property  was,  in  a 
sense,  ahead  of  its  time.    The  rapidity  with  which 


BUILDING  AXONG  THE  SANTA  Ffi  TRAIL  157 

It  shot  across  the  State  of  Kansas  in  1872  waa 
equaled  only  by  the  promptness  with  which  it 
fell  into  financial  straits.  No  sooner  had  its  com- 
plete  line  been  opened  for  traffic  than  the  panic 
of  1873  occurred;  the  company  became  embar- 
rassed  by  a  large  floating  debt;  and  a  compromise 
had  to  be  made  with  the  bondholders  whereby  a 
postponement  of  a  year's  interest  was  arranged. 

No  attempts  were  made  to  extend  the  Santa  F6 
during  the  long  period  of  depression  following  the 
panic  of  1873.     The  road  ended  in  1872  at  the 
Colorado  state  line,  and  during  the  next  few  years 
the  only  building  of  importance  was  a  western 
spur  to  connect  with  the  Denver  and  Rio  Grande 
at  Pueblo,  thereby  giving  an  outlet  to  the  growing 
city  of  Denver  and  the  rapidly  developing  min- 
ing regions  of  Colorado.   About  1880,  construction 
was  resumed  in  a  leisurely  way,  down  the  valley  of 
the  Rio  Grande  into  New  Mexico  and  in  the  direc- 
tion of  Albuquerque.     In  this  extension,  as  in  later 
building,  the  line  of  the  old  Arizona  trail  was  usu- 
ally followed.    One  writer  has  declared  that  "the 
original  builders  of  the  Atchison  followed  the  line 
of  the  Arizona  trail  so  religiously  that  if  the  trail 
skirted  a  ten-foot  stream  for  a  quarter  of  a  mile  tc 
strike  a  shallow  spot  for  fording,   the  railroad 


158  THE  RAILROAD  BUILDERS 

builders  did  likewise,  instead  of  bridging  the  stream 
where  they  struck  it,  and  where  the  trail  ran  up  a 
tree  or  hid  in  a  hollow  rock  to  avoid  the  wolves  or 
savages,  the  railroad  did  the  same!" 

The  traveler  of  a  generation  ago  over  this  par- 
ticular section  of  the  Santa  F6  lines  might  have 
felt  that  there  was  some  truth  in  this  criticism; 
but  the  Atchison  has  long  since  cut  out  these  idio- 
syncrasies of  early  construction,  and  the  main  line 
in  this  section  of  New  Mexico  is  now  noted  for 
alinement  and  absence  of  curves  and  grades. 

The  builders  of  the  Santa  Fe  lines  in  the  early 
days  no  doubt  planned  ultimately  to  penetrate 
to  the  Pacific  coast,  knowing  that  the  real  op- 
portunity for  the  road  lay  in  that  direction.    The 
Southwest  was  yet  but  sparsely  settled;  and  no 
railroad  which  had  as  its  objective  the  plains  or 
alkali  deserts  of  Arizona  or  New  Mexico  could 
thrive — at  least  it  could  not  for  decades  to  come. 
And  yet  in  the  eariy  eighties  the  real  objective 
of  the  Atchison  system  had  not  been  determined. 
Having  passed  its  original  objective  point,  Santa 
Fe,  the  road  had  reached  Albuquerque,  but  it 
could  not  aflford  to  stop  there.     Through  traflSc 
it  must  have  or  die.    New  Mexico,  with  its  thin 
:)opulation  and  its  total  lack  of  development,  could 


BUILDING  ALONG  THE  SANTA  FE  TRAIL  159 

not  supply  traffic  in  sufficient  amount  even  to 
"feed  the  engines. " 

To  extend  somewhere,  then,  was  an  impera- 
tive necessity.    But  whither?     Several  routes  were 
under  consideration.     The  Southern  Pacific  lines 
had  worked  eastward  to  El  Paso  on  the  Mexican 
border,   several  hundred   miles  due  south   from 
Albuquerque,  and  it  looked  feasible  to  extend  the 
Atchison  to  that  point  and  arrange  a  traffic  agree- 
ment with  the  Southern  Pacific,  or  to  build  an  ex- 
tension through  New  Mexico  to  Deming  and  then 
westward  along  the  river  valleys  and  down  into 
Mexico  to  Guaymas  on  the  Gulf  of  California. 
It  was  possible,  in  the  third  place,  to  build  di- 
rectly west  from  Albuquerque  through  Arizona 
and  Southern  California  to  the  coast.    Ultimately 
all  of  these  plans  were  carried  out. 

The  first  extension  of  the  Santa  Fe  was  to  Dem- 
ing.  New  Mexico,  where  in  March,  1881,  its  tracks 
fliet  those  of  the  Southern  Pacific,  and  by  agree- 
ment the  company  secured  the  use  of  the  South- 
ern Pacific  to  Benson,  Arizona.  From  the  first 
this  new  through  route  to  the  Pacific  began  to  pay 
handsomely.  Later  on  the  line  into  Guaymas, 
Mexico,  was  added  by  the  purchase  of  the  Sonora 
Railway.     Soon  afterward  the  Santa  F^  secured 


160  TriE  RAILROAD  BUILDERS 

from  the  St.  Louis  and  San  Francisco  Railway  a 
half  interest  in  the  charter  of  the  Atlantic  and  Pa- 
cific, a  company  which  planned  to  build  through  to 
the  coast.  Meanwhile  the  St.  Louis  and  San  Fran- 
cisco had  been  acquired  by  the  Gould  and  Hunt- 
ington interests,  which,  as  the  owners  of  the  Texas 
and  Pacific  and  the  Southern  Pacific  systems, 
naturally  opposed  the  plans  of  the  Santa  F6.  Tht 
matter  was  comprom'sed  by  the  agreement  of  the 
Santa  Fe  to  build  no  farther  west  than  tli*^  Colo- 
rado River,  where  the  Santa  F6  was  to  be  \et  by 
an  extension  of  the  Southern  Pacific  line  from 
Mojave,  California. 

This  arrangement  proved  unprofitable  to  the 
Santa  Fe,  for  the  Southern  Pacific  naturally 
diverted  trafiic  to  El  Paso  and  Ogden.  A  new  ar- 
rangement was  accordingly  made  in  1884,  involv- 
ing the  purchase,  by  the  Atlantic  and  Pacific,  of 
the  Southern  Pacific  division  between  Needles  and 
Mojave,  the  obtaining  of  trackage  rights  between 
Mojave  and  San  Francisco,  and  the  use  of  the 
Southern  Pacific  terminals  at  San  Francisco.  To 
assure  a  connection  with  the  coast  in  Southern 
California,  the  Santa  Fe  built  a  line  to  Colton, 
acquired  the  California  Southern  Railway  from 
Colton  to  San  Diego,  and  effected  an  entrance  to 


BUILDING  ALONG  THE  SANTA  Ffi  TRAIL  161 

Los  Angeles  by  leasing  the  Southern  Pacific  tracka 
from  Colton. 

The  Santa  F6  had  now  reached  the  Pacific  coast 
over  its  own  lines,  but  it  was  handicapped  by  poor 
connections  with  the  East.  Its  next  move  there- 
fore was  eastward  to  Chicago,  where  it  acquired 
the  Chicago  and  St.  Louis  Railroad  between  Chi- 
cago and  Streator,  Illinois,  and  then  constructed 
lines  between  the  latter  point  and  the  Missouri 
River.  During  the  same  year  the  company  opened 
branches  southward  to  the  Gulf  of  Mexico,  un- 
til by  May,  1888,  the  entire  system  comprised 
7100  miles. 

This  rapid  expansion  of  the  property,  combined 
with  extravagance  in  management  and  a  reckless 
policy  in  the  payment  of  dividends,  brought  the 
company  into  financial  diflSculties  within  a  year 
after  the  completion  of  the  system.     Unprofitable 
branches  had  been  built,  and  these  had  become  an 
immediate  burden  to  the  main  system.     It  is  the 
same  story  that  has  been  told  of  most  of  the  large 
railroads  of  those  days.     Strenuous  eflp"'*^  »?»•*» 
made  to  save  the  property  from  a  receivership, 
and  a  committee  was  appointed  in  September, 
1889,  to  devise  ways  and  means  of  reform  and 
reorganization. 


164  IHE  RAILROAD  BUILDERS 

The  new  management  of  the  Santa  F6  was  a 
rational  one  and  substantially  reduced  the  obliga- 
tions of  the  road.  Had  its  spirit  been  maintained, 
a  second  failure  and  reorganization  a  few  years 
later  would  not  have  been  necessary.  New  inter- 
ests,  howe\  vr,  came  into  the  property,  and,  though 
it  was  hoped  that  they  would  support  a  conser- 
vative policy,  the  former  programme  of  expan- 
sion was  resumed  until  in  1890  the  St.  Louis  and 
San  Francisco  system  was  merged  with  the  Santa 
Fe  on  a  very  extravagant  basis.  Within  a  year  it 
was  clear  that  the  St.  Louis  and  San  Francisco 
would  prove  more  of  a  liability  than  an  asset. 
During  the  same  time  the  less  important  purchase 
of  the  Colorado  Midland  Railway  also  turned  out 
to  be  a  poor  investment. 

The  next  four  years  were  marked  by  more  bad 
financial  management  whiVh  culminated  in  the  fail- 
ure of  the  reorganized  company.  In  1892  an  ex- 
change of  income  bonds  for  fixed  interest-bearing 
bonds  so  increased  the  fixed  charges  of  the  com- 
pany that,  as  a  result  of  the  panic  of  1893  and  its 
ensuing  depression,  the  great  Santa  Fe  system 
suddenly  found  itself  in  the  hands  of  a  receiver. 
The  president,  John  W.  Reinhart,  had  persistently 
asserted  throughout  1893  that  the  company  was 


BUILDING  ALONG  THE  SANTA  Ffi  TRAIL  16S 

finuncially  sound;  but  an  examination  of  its  books 
subsequently  made  in  the  interest  of  the  secur- 
ity holders  disclosed  gross  irregularities,  dishonest 
management,  and  manipulation  of  the  accounts. 

During  the  year  1894  the  property  was  operated 
under  the  protection  of  the  courts,  and  early  in 
1895  a  new  and  comprehensive  scheme  of  reor- 
ganization was  carried  out.  This  latest  plan  in- 
volved dropping  the  St.  Louis  and  San  Francisco 
system,  the  Colorado  Midland,  and  all  other  un- 
profitable branches;  it  wiped  out  the  floating  debt; 
it  supplied  millions  of  new  capital;  and  it  enabled 
the  succeeding  management  at  once  to  build  up 
and  improve  the  property. 

At  the  head  of  the  new  coupany  was  placed 
Edward  P.  Ripley  —  a  railroad  manager  of  great 
executive  ability  and  a  practical,  broad-minded 
business  man  of  the  modem  type,  who  has  ever 
since  remained  president  of  the  road.  The  his- 
tory of  the  Santa  Fe  since  1895  has  been  closely 
identified  with  Ripley's  business  career,  and  its 
record  during  these  two  decades  has  been  an  en- 
viable one.  Steady  progress  from  year  to  year  in 
volume  of  business,  in  general  development  of  the 
system,  in  improvement  of  its  rights  of  way,  ter- 
minals, and  equioment.  has  characterized  its  history 


164  THE  RAILROAD  BUILDERS 

through  periods  of  depression  as  well  vs  times 
of  prosperity.  Its  resources  have  gro\  to  vast 
totals;  its  credit  equals  that  of  the  best  Ameri- 
can railn  ads;  its  stocks  and  bonds  are  prime  in- 
vestments; and  each  year  it  pours  millions  ot 
dollars  of  profits  into  the  hands  of  its  stockholders. 


CHAPTER  IX 


THE  GROWTH  OP  THE  HILL  LINES 


The  States  which  form  the  northern  border  of  the 
United  States  westward  from  the  Great  Lakes  to 
the  Pacific  coast  include  an  area  several  times 
larger  than  France  and  jould  contain  ten  Englanda 
and  still  have  room  to  spare.  The  distance  from 
the  head  of  the  Great  Lakes  at  Duluth  to  the  Pa- 
cific coast  in  the  State  of  Washington  is  greater 
than  the  distance  from  London  to  Petrograd  or 
the  distance  from  Paris  to  Constantinople,  and 
three  times  the  distance  from  Washington,  D.  C, 
to  Chicago. 

Fifty  years  ago  these  States,  with  the  single  ex- 
ception of  Wisconsin,  were  practically  a  wilder- 
ness in  which  only  the  Indian  and  buffalo  gave 
evidences  of  life  and  activity.  No  railroads  pene- 
trated the  forests  or  the  mountain  ranges.  Far 
southward  some  progress  in  the  march  of  civiliza- 
tion had  been  made;  the  Union  Pacific  had  linked 


IA5 


166  THE  RAILROAD  BUH^DERS 

the  West  with  the  East  before  the  eighth  decade  o! 
the  century  began,  and  the  Northern  Pacific  proj- 
ect was  being  painfully  pushed  through  the  inter- 
mediate tier  of  States  during  the  seventies.  But 
the  material  resources  of  the  Great  Northwest  had 
still  to  be  discovered. 

When  the  Northern  Pacific  Railway  failed  in 
1873,  the  crash  involved  a  little  railroad  known 
as  the  ht.  Paul  and  Pacific,  running  out  of  St.  Paul 
for  a  couple  of  hundred  miles  westward,  with  a 
branch  to  the  north  joining  the  Northern  Pacific 
at  Brainerd.  Minnesota.  The  St.  Paul  and  Pacific 
had  been  acquired  in  the  interest  of  the  Northern 
Pacific  some  years  earlier  but  was  now  regarded 
as  a  property  so  worthless  that  its  owners  would 
be  glad  to  get  rid  of  it,  if  only  they  could  find  a 
purchaser  rash  enough  to  take  it  over. 

During  the  three  years  following  the  panic  (A 
1873  the  crops  of  Minnesota  were  practically  eat- 
en up  l)y  the  grassho|)pers,  and  poverty  reigned 
among  the  farmers.  At  that  time  a  short,  stocky 
man  with  long  hair,  one  blind  eye,  and  the  reputa- 
tion of  being  the  greatest  talker  in  town,  kept  a 
coal  and  wood  store  in  St.  Paul.  His  name  was 
James  J.  Hill.  For  years  he  had  been  a  familiar 
figure,  sitting  in  his  old  chair  in  front  of  his  store 


THE  GROWTH  OF  THE  HILL  LINES     167 

and  discoursing  on  current  events.  This  man  was 
not  only  an  interesting  talker;  he  was  a  visionary, 
a  dreamer  —  and  one  of  his  dreams  was  to  buy  the 
St.  Paul  and  Pacific  Railroad  and  to  transform  it 
into  a  real  railway  line.  Nearly  twenty  years 
had  passed  since  he  had  drifted  in,  an  eighteen- 
year-old  Scotch-Irish  boy  from  Ontario,  and  had 
begun  work  in  a  steamship  office  on  the  levee  at 
St.  Paul.  Now,  in  1876,  he  was  thirty-eight  years 
old  and  a  town  character.  And  the  town  felt  that 
it  had  his  measure.  He  had  already  tried  a  vari- 
ety of  occupations,  and  at  this  time  was  agent  for 
lines  of  steamboats  on  the  Mississippi  and  the 
Red  River.  Everybody  knew  him  and  liked  him, 
but  no  one  took  him  very  seriously.  The  idea 
of  his  controlling  the  St.  Paul  and  Pacific  was 
even  amusing. 

Now  the  most  promising  part  of  the  St.  Paul 
and  Pacific  when  it  failed  in  1873  was  the  line  from 
St.  Paul  to  Breckeiridge  on  the  Red  River.  Hill 
was  the  Mississippi  steamboat  agent  at  one  end; 
at  the  other,  an  old  Hudson  Bay  trader,  Norman 
W.  Kittson,  ran  two  little  old  stem-wheel  steam- 
l)oats  from  Breckenridge  to  Winnipeg.  A  large 
part  of  the  freight  that  Hill  and  Kittson  handled 
was  for  the  Hudson's  Bay  Company.    It  came  up 


168  THE  RAILROAD  BUILDERS 

the  Mississippi,  went  across  on  the  St.  Paul  and 
Pacific  to  Breckenridge,  and  then  down  the  Red 
River  on  Kittson's  steamboats  until  it  was  re- 
ceived at  Fort  Garry,  Winnipeg,  by  Donald  Alex- 
ander Smith,  then  commissioner  for  the  Hudson's 
Bay  Company. 

Smith,  who  became  afterwards  Lord  Strathcona 
and  High  Commissioner  for  Canada  in  England, 
was  a  tall,  lean,  urbane  Scotchman  with  a  soft 
manner  and  si  long  red  beard.  In  1876  he  was 
fifty-six  years  old,  with  a  life  of  strange,  wild  ad- 
venture behind  him.  He  had  gone  when  little  more 
than  a  boy  to  Labrador  to  take  charge  of  a  station 
of  the  Hudson's  Bay  Company.  Among  the  north- 
ern Indians  he  stayed  for  thirteen  years.  In  the 
sixties  he  was  practically  king  over  all  the  savage 
territory  of  the  company  along  the  waters  enter- 
ing Hudson  Bay.  By  the  seventies  he  was  a  man 
of  means  and  he  had  some  influence  in  the  new 
Dominion  of  Canada. 

It  would  be  a  great  advantage  to  Smith  to  have 
a  good  railroad  from  St.  Paul  to  Winnipeg  as  the 
Red  River  l)oats  were  frozen  up  in  the  winter  and 
the  service  on  the  St.  Paul  and  Pacific,  under  the 
receiver,  was  impossible.  So  Smith  listened  with 
favor  to  Hill's  nroject  of  getting  hold  of  the  St. 


THE  GROWTH  OT  THE  RTLL  LINES     169 

''  ul  and  Pacific  and  making  a  real  railroad  out 
of  it.     And  whenever  Smith  went  to  Montreal  he 
talked  the  matter  over  with  his  cousin  George 
Stephen  —  later  Lord  Mount  Stephen  —  who  was 
the  head   of  the   Bank  of  Montreal.     In    1877 
Stephen  and  Richard  B.  Angus,  the  general  man- 
ager of  the  Bank,  went  to  Chicago  on  business. 
While  there,  they  had  two  weeks'  time  on  their 
hands,  and  tossed  a  penny  t^  decide  whether  to 
run  down  to  St.  Louis  or  up  to  St.  Paul.    The 
penny  sent  them  to  St  Paul.    "  I  am  glad  of  that," 
said  Stephen;  "it  will  give  us  a  chance  to  see  the 
prairies  and  look  over  that  St.  Paul  and  Pacific 
road  that  Donald  Smith  is  always  talking  about.'* 
When  they  arrived  in  St.  Paul,  James  J.  Hill 
took  them  over  the  line  to  Breckenridge.     The 
country  had  been  scoured  by  the  grasshoppers  and 
looked  like  the  top  of  an  old  rusty  stove.     But 
Stephen  was  a  broad-minded  man,  wise  enough  to 
know  that  the  pest  of  grasshoppers  could  not  la.st 
forever.    He  was  greatly  impressed  with  the  ulti- 
inate  possibilities  of  the  soil  and,  under  the  hyp- 
notic influence  of  Hill's  eloquence,  became  quite 
enthusiastic  over  the  scheme  for  getting  hold  of 
the  railroad;  but,  as  it  would  evidently  involve 
millions,  he  didn't  see  how  it  could  be  done. 


170  THE  RAILROAD  BUILDERS 

The  road  had  originally  been  financed  by  bonds 
3old  largely  in  Holland,  and  to  do  anythmg  at  all 
it  was  necessary  to  get  in  touch  with  these  Dutch 
bondholders.  In  1877  Stephen  went  over  to  Am 
sterdam  and  secured  an  option  on  the  bonds  at 
thirty  cents  on  the  dollar  —  less  than  the  accrued 
interest  which  was  due  and  unpaid  on  them.  He 
then  came  back  to  America,  conferred  with  John 
S.  Kennedy  at  New  York,  who  represented  both 
Dutch  and  American  bondholders,  and  brought 
Kennedy  into  the  combination. 

In  the  spring  of  1878  the  St.  Paul  and  Pacific 
was  taken  over.  People  still  smiled  at  Hill  and 
wondered  how  he  had  induced  a  hard-headed  bank 
president  like  Stephen  to  put  up  the  money.  No- 
body in  St.  Paul  believed  in  the  future  of  the  road. 
Even  the  syndicate's  attorneys,  when  offered  a 
choice  between  taking  $25,000  in  cash  or  $500,000 
of  the  now  road's  stock  for  their  services,  preferred 
the  cash.  Had  they  taken  the  stock  and  held  it 
for  thirty  years,  they  would  have  had,  in  principa! 
and  interest,  some  $30,000,000. 

To  the  surprise  of  everybody,  including  Hill  and 
his  friends,  the  grasshoppers  suddenly  disappeared 
in  the  early  summer  of  1877  and  never  came  back. 
That  summer  saw  the  biggest  wheat  crop  that 


THE  GROWTH  OF  THE  HILL  LINES  171 
had  ever  been  harvested  in  Minnesota.  "Hiirs 
Folly, "  as  it  was  afterwards  called,  with  its  thirty 
locomotives  and  few  hundred  cars,  was  feverish 
with  success .  Hill  worked  every  possible  source  to 
get  extra  cars  and  went  all  the  way  to  New  York  to 
buy  a  lot  of  discarded  passenger  coaches  from  the 
Harlem  Railroad.  By  the  end  of  the  season  it 
was  evident  to  everybody  that  the  St.  Paul  and 
Pacific  was  going  to  have  a  career  and  that  "Jim** 
Hill's  dream  was  coming  true. 

Immediately  the  fortunate  owners  began  to 
plan  for  the  future.  They  had  acquired  the  road 
at  an  initial  cost  of  only  $280,000  in  cash.  In  the 
following  year  they  advanced  money  for  the  com- 
pletion of  the  unfinished  section,  as  necessary  to 
obtain  the  benefit  of  a  generous  grant  of  land  from 
the  State.  Then,  in  1879,  having  acquired  full 
possession  of  the  property,  and  having  several 
millions  of  dollars  in  profits,  they  issued  bonds  for 
further  developments.  This  gave  them  suflicient 
basis  to  enlarge  their  scheme  greatly,  and  in  the 
formation  of  the  St.  Paul,  Minneapolis  and  Mani- 
toba Railroad,  they  created  $15,000,000  of  stock, 
which  was  divided  equHably  among  Hill,  Stephen, 
Angus,  Smith,  Kennedy,  and  Kittson.  This  stock 
was  all  "water,"  but  the  railroad  prospered  .so 


171  THE  RAILROAD  BUILDERS 

extraordinarily  in  the  succeeding  few  years  that  by 

1882  the  stock  was  worth  $140  a  share.    And  in 

1883  they  issued  to  themselves  $10,000,000  of  six 
per  cent  bonds  for  $1,000,000  —  a  further  division 
of  $9,000,000,  coming  out  of  nothing  but  good  will, 
earning  power,  and  future  prospects. 

The  decade  from  1880  to  1890  witnessed  a  steady 
growth  of  the  system  formed  in  1879  under  the 
name  of  the  St.  Paul,  Minneapolis  and  Manitoba. 
The  600  odd  miles  which  it  embraced  when  Hill 
and  his  coterie  made  their  big  stock  division  had 
grown  in  1890  to  2775  miles.    It  then  consisted  of 
a  main  line  reaching  from  St.  Paul  and  Minneapolis 
across  Minnesota  and  the  northern  part  of  North 
Dakota,  far  into  Montana,  with  a  second  main 
line  from  Duluth  across  Minnesota  to  a  junction 
with  the  St.  Paul  line  in  North  DakoU,  besides 
numerous  branches  reaching  points  of  importance 
in  both  these  States. 

But  the  development  of  the  Hill  properties  had 
by  no  means  reached  its  limit  at  this  time.  Hill's 
dream  had  been  to  construct  a  through  line  across 
the  northern  tier  of  States  and  Territories  to  the 
Pacific,  and  this  plan  had  been  constantly  in  his 
mind  while  he  was  building  up  the  system  in  Mani- 
toba.   The  original  line  running  up  into  Manitoba 


THE  GROWTH  OP  THE  HILL  LINES     ITS 

and  reaching  Winnipeg  was  all  very  well  as  a  start. 
It  had  paid  so  well  that  the  original  group  of  men 
had  become  millionaires  almost  overnight.  But 
Hill  meant  to  show  the  public  that,  after  all,  the 
early  success  was  only  an  incident  and  merely  a 
stepping-stone  to  the  really  great  thing. 

Practical  railroad  men  everywhere  ridiculed  the 
idea  of  a  railroad  running  across  the  far  north- 
em  country,  climbing  mountain  ranges,  travers- 
ing hundreds  of  streams  and  extending  for  great 
stretches  through  absolutely  wild  and  uninhabited 
regions.  Especially  did  they  deem  it  absurd  to 
attempt  such  an  undertaking  without  government 
aid,  subsidies,  or  grants  of  land,  pointing  to  the 
experience  of  such  roads  as  the  Union  Pacific, 
Northern  Pacific,  and  Santa  F^.  All  these  had  re- 
ceived financial  assistance  and  large  land  grants, 
and  yet  all  had  gone  through  long  periods  of  finan- 
cial vicissitude  before  they  had  become  profitable 
and  stable  enterprises. 

But  Hill  was  more  farseeing  than  his  critics. 
In  1889  the  name  of  the  company  was  changed  to 
the  Great  Northern  Railway,  and  under  this  title 
the  extension  to  the  coast  was  rapidly  carried  for- 
ward and  was  opevied  in  the  panic  year  of  1893. 
When  all  the  other  transcontinental  lines  went  into 


174  THE  RAILROAD  BUILDERS 

bankruptcy,  HiU's  road  not  only  kept  out  of  the 
courts  but  actually  earned  and  paid  annual  divi- 
dends of  five  per  cent  on  its  stock.  The  five  years 
from  1896  to  1901  were  years  of  uninterrupted 
prosperity  for  the  Great  Northern  Railroad.  Each 
year  its  credit  rose;  each  year  it  grew  to  be  more  of 
a  force  in  the  Western  railway  situation.  In  these 
years  the  control  of  the  property  had  somewhat 
changed  and  a  few  of  the  original  promoters  had 
died  or  had  withdrawn.  But  Hill,  Lord  Strath- 
cona,  Lord  Mount  Stephen,  and  John  S.  Kennedy 
of  the  original  group,  all  held  their  large  interests, 
and  Hill  in  particular  had  added  to  his  holdings  as 
the  years  had  gone  by. 

The  secret  of  Hill's  striking  success  with  his 
Western  extension  was  the  method  by  which  the 
line  was  constructed.  Hill  had  a  theory  that  it  was 
far  better  to  go  around  mountains  and  avoid  grades 
than  to  climb  them  or  to  bore  through  them;  it 
was  always  better  to  find  the  route  which  would 
make  long  hauls  easy  and  economical.  He  thus 
built  his  road  with  the  idea  of  keeping  down  the 
operating  costs  and  of  showing  a  larger  margin  of 
profit  than  the  others.  From  the  very  start  the 
Great  Northern  was  noted  for  its  low  ratio  of  oper- 
ating expenses  and  its  comparatively  long  trains 


THE  GROWTH  OF  THE  HILL  LINES     175 

and  heavy  trainloads.    It  was  by  this  method 
that  it  really  made  its  money. 

By  the  year  1901  the  Great  Northern  Railway 
absolutely  controlled  its  own  territory.     But  it 
wa»  still  handicapped  by  lack  of  an  independent 
entrance  into  Chicago,  as  its  eastern  lines  ter- 
minated at  Duluth  and  St.  Paul.    At  the  west- 
em  end  also,  the  situation  was  unsatisfactory.  It 
seemed  important  for  the  Great  Northern  to  con- 
trol a  line  of  its  own  into  Portland,  Oregon,  be- 
cause the  Northern  Pacific  Railroad,  which,  as  we 
have  seen,  had  been  reorganized  several  years 
before  by  the  Morgan  interests,  had  been  rapidly 
extending  its  lines  in  Oregon  and  Washington. 
Hill  and  his  associates,  therefore,  had  been  quietly 
buying  a  substantip'  interest  in  the  Northern  Pa- 
cific property  and  thus,  in  the  course  of  time, 
had  come  into  closer  relations  with  the  Morgan 
group  in  New  York.    Soon  afterward,  under  Hill's 
influence,  the  Northern   Pacific  began  the  con- 
struction of  further  extensions  in   Oregon   and 
reached  into  territory  that  the  Harriman  inter- 
ests in  the  Union  Pacific  Railroad  had  regard- 
ed as  their  own.     This  move  created  much  fric- 
tion between  the  Harriman  and  Hill  groups,  and 
in  order  to  forestall  danger   Harriman  in  turn 


MICROCOPY    RESOLUTION    TEST   CHART 

(ANSI  and  ISO  TEST  CHART  No.  2) 


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1653   East   Main   Street 

Rochester     Ne*    rork         H609       USA 

(716)   482  -0300-  Phone 

(716)   288 -5989 -Fax 


176  THE  RAILROAD  BUILDERS 

began  quietly  accumulating  an  interest  in  the 
Northern  Pacific  pn  r»erty  by  purchases  in  the 
open  market. 

The  story  of  the  battle  royal  between  the  Hill 
and  Harriman  interests  will  be  told  in  a  subsequent 
chapter.    It  is  not  necessary  to  repeat  the  history 
of  the  famous  corner  of  1901  nor  of  the  compro- 
mise effected  by  the  formation  of  the  Northern 
Securities  Company.    The  final  result  of  this  con- 
test was  the  complete  harmonizing  of  the  Western 
railroad  situation,  so  far  as  the  Hill  and  the  Harri- 
man interests  were  concerned.    In  the  succeeding 
years  the  Great  Northern  system  penetrated  to  the 
heart  of  Manitoba  and  constructed  lines  through 
British  Columbia  to  Nelson  and  Vancouver.    It 
built  other  branches  to  Spokane,  Washington,  and 
Helena  and  Butte,  Montana.    Moreover  by  the 
discovery  of  extensive  ore  deposits  on  the  lines  of 
the  company  in  northern  Minnesota  and  by  subse- 
quent purchases  of  other  mines,  the  Great  North- 
ern acquired  control  of  about  sixty-five  thousand 
acres  and  hundreds  of  millions  of  tons  of  iron  ore. 
All  the  properties  so  controlled  were  leased  on  a 
very  profitable  basis  to  the  United  States  Steel 
Corporation.    The  Great  Northern  Railroad  it- 
self did  not  retain  control  of  the  ore  lands  but. 


THE  GROWTH  OF  THE  HHX  U^ES  m 
through  a  trusteeship,  gave  a  beneficial  interest 
in  them  to  its  stockholders  in  the  shape  of  a 
special  dividend. 

The  profits  under  this  lease  promised  to  be  very 
large  in  the  course  of  time,  but  the  Steel  Corpora- 
tion had  the  option  to  cancel  after  a  five-year 
period,  and  in  1912,  as  the  result  of  a  United  States 
Government  suit  for  the  dissolution  of  the  Steel 
Corporation,  the  lease  was  canceled.  Since  that 
time  the  trustees  of  the  ore  lands  have  executed 
other  leases,  and  the  Great  Northern  ore  certi- 
ficates are  bringing  in  a  substantial  return  to 
their  owners. 

The  three  Hill  lines  —  the  Great  Northern,  the 
Northern  Pacific,  and  the  Chicago,  Burlington 
and   Quincy  — have   been   unusually  profitable. 
The  Great  Northern  and  the  Northern  Pacific  have 
steadily  paid  liberal  dividends  to  their  stockhold- 
ers on  increasing  amounts  of  capital  stock;  and  the 
Burlington,  whose  whole  stock  is  owned  by  these 
two  roads,  has  also  handed  over  liberal  profits  year 
by  year,  at  the  same  time  accumulating  an  earned 
surplus  of  more  than  one  hundred  million  dollars 
and  spending  an  almost  equal  amount  of  profits 
on  the  improvement  and  maintenance  of  the  prop- 
erty.  The  Burlington  today  controls  the  Colorado 


la 


178  THE  RAILROAD  BUILDERS 

Southern,  which  extends  southward  from  the 
Burlington  lines  in  Wyoming,  passing  through 
Denver,  Pueblo,  Fort  Worth,  and  other  pointe 
southward  to  the  Gull. 


CHAPTER  X 


THE  RAILROAD   SYSTEM   OF  THE  SOUTH 


In  the  year  1856  a  small  single-track  railroad  was 
opened  from  Richmond  to  Danville,  Virginia. 
This  enterprise,  like  many  others  in  ante-bellum 
days,  was  carried  out  largely  with  funds  supplied 
by  the  State.  As  long  afterwards  as  1867,  three- 
fifths  of  the  stock  was  owned  by  the  State  of  Vir- 
ginia, but  soon  after  this  time  the  State  disposed 
of  its  investment  to  a  railroad  company  operating 
a  line  in  North  Carolina  from  Goldsboro  westward 
to  Greensboro,  and  projected  southward  to  Char- 
lotte. In  modern  times,  this  little  road,  like  the 
Richmond  and  Danville,  has  become  an  integral 
part  of  the  Southern  Railway  system,  but  in  those 
days  it  was  controlled,  curiously  enough,  by  the 
Pennsylvania  Railroad  Company. 

After  1867  the  new  owners  of  the  Richmond  and 
Danville  began  aggressively  to  extend  their  lines. 
By  leasing  the  North  Carolina  Railroad,  a  small 

179 


180  THE  RAILROAD  BUILDERS 

property  forming  a  link  with  the  Greensboro  line, 
they  created  a  through  route  from  Richmond  to 
Charlotte.  By  1874  they  had  built  the  road  south- 
ward to  Atlanta,  Georgia,  and  had  thus  formed 
the  first  continuous  route  from  Richmond  to  that 
city.  Because  of  the  extreme  disorder  and  de- 
pression in  the  South  during  the  years  after  the 
Civil  War  the  line  did  not  prosper  and  was  sold 
under  foreclosure  about  1875.  But  the  company 
was  reorganized  in  1878  and  acquired  the  Char- 
lotte, Columbia  and  Augusta,  thus  extending  its 
lines  into  the  heart  of  South  Carolina  and  tapping 
a  rich  territory.  During  these  early  years  the 
Pennsylvania  Railroad  interests,  which  still  held 
control,  supplied  the  funds  necessary  for  making 
improvements. 

At  the  same  time  that  the  Richmond  and  Dan- 
ville was  linking  up  the  commercial  centers  of 
the  southern  Atlantic  seaboard,  another  system  — 
known  as  the  East  Tennessee,  Virginia  and  Geor- 
gia —  was  being  built  up  in  the  Appalachian 
Mountains  to  the  west.  This  property  and  its 
piedecessors  had  to  some  extent  been  state-owned 
enterprises  at  first,  but  in  1870  the  Pennsylvania 
Railroad  interests  acquired  control.  A  holding 
company  called  the  Southern  Railway  Securities 


THE  RAILROAD  SYSTEM  OF  THE  SOUTH    181 

Company  was  now  formed  for  the  purpose  of  con- 
trolling all  the  Pennsylvania  Railroad  interests 
south  of  Washington.  Besides  the  properties 
mentioned,  this  Securities  Company  soon  obtained 
several  other  Atlantic  seaboard  properties  extend- 
ing from  Richmond  to  Charleston,  and  also  the 
Memphis  and  Charleston  Railroad,  running  from 
Memphis  to  Chattanooga. 

Thus  at  this  early  day  a  considerable  railroad 
system  had  been  welded  together  in  the  South, 
reaching  many  points  of  importance  and  forming 
direct  connection  at  Washington  with  the  northern 
properties  of  the  Pennsylvania  system.  Had  this 
experiment  been  successful,  we  would  perhaps  to- 
day reckon  the  great  Southern  Railway  system  as 
part  of  the  Pennsylvania  group.  But  the  outcome 
was  disappointing;  the  roads  did  not  prosper;  and 
soon  the  poorer  sections  began  to  default.  The 
Pennsylvania  then  disposed  of  its  interests  and 
left  the  roads  to  shift  for  themselves. 

The  East  Tennessee  was  the  best  of  these  minor 
lines,  and  in  1877  it  began  to  acquire  others  ex- 
tending through  the  South.  Soon  it  had  pene- 
trated the  heart  of  Alabama,  reaching  what  is 
today  known  as  the  Birmingham  district.  Addi- 
tional extensions  were  made  to  Macon  and  Rome, 


182  THE  RAILROAD  BUILDERS 

Georgia,  and  on  the  north  an  alliance  was  ar- 
ranged with  the  Norfolk  and  Western,  while  with 
a  view  to  securing  some  of  the  business  of  the  West, 
a  connection  was  constructed  at  Kentucky-Ten- 
nessee state  line.  Such  was  the  condition  of  the 
East  Tennessee  property  by  the  end  of  1881.  In 
the  meantime  the  Richmond  and  Danville  had 
practically  stood  still. 

About  this  time  a  definite  revival  set  in  through- 
out the  South  as  the  long-drawn-out  period  of 
depression  following  the  war  came  to  an  end. 
Railroad  activity  revived,  and  both  the  East  Ten- 
nessee, Virginia  and  Georgia  and  the  Richmond 
and  Danville  roads  passed  into  the  hands  of  new 
and  more  aggressive  interests.     The  new  owners 
constructed  the  Georgia  Pacific,  which  ultimately 
stretched  across  Alabama  and  Mississippi.     To 
finance  this  enterprise  and  to  consolidate  their  in- 
terests, a  new  holding  company  —  the  Richmond 
and  West  Point  Terminal  Railway  and  Warehouse 
Company  —  was  formed  in  1881  with  large  powers 
and  authority  to  acquire  the  stocks  and  bonds  of 
railroad  properties  in  many  Southern  States.     In 
addition  to  the  properties   already  named,  the 
Virginia  Midland  Railway  was  now  acquired,  and 
by  1883  the  entire  system  had  been  merged  under 


THE  RAILROAD  SYSTEM  OF  THE  SOUTH    183 

this  organization.  The  company  also  secured  the 
control  of  a  line  of  steamboats  running  from  West 
Point,  Virginia,  to  Baltimore,  and  made  close 
traffic  arrangements  with  the  Clyde  line  of  steamers 
running  between  New  York  and  Philadelphia  and 
all  important  Southern  points. 

The  personality  at  the  head  of  the  Richmond 
and  West  Point  Terminal  Railway  and  Warehouse 
Company  was  Calvin  S.  Brice,  a  man  who  had 
become  increasingly  prominent  in  railway  affairs 
in  the  Southern  States.  Brice  was  something  of  a 
genius  at  combination  and  by  1883  had  linked  to- 
gether and  solidified  the  various  properties  in  a 
very  efl5cient  manner.  Nevertheless  the  competi- 
tive conditions  of  the  time,  combined  with  the 
necessarily  more  or  less  crude  and  hazardous 
methods  adopted  in  financing  and  capitalizing  the 
enterprise,  prevented  the  credit  of  the  organiza- 
tion from  reaching  a  sound  and  secure  level.  The 
Tennessee  properties  especially  proved  an  encum- 
brance, and  they  were  almost  immediately  threat- 
ened with  bankruptcy.  Brice  therefore  decided  to 
reorganize  these  subsidiary  lines,  and  a  new  com- 
pany called  the  East  Tennessee,  Virginia  and  Geor- 
gia Railway  took  over  this  section  of  the  system 
in  1886. 


184  THE  RAILROAD  BUILDERS 

In  the  meanwhile  the  Richmond  and  Danville 
properties,  which  were  themselves  becoming  bur- 
dened with  an  ever  growing  debt,  gave  the  Brice 
interests  constant  trouble.    A  large  amount  of  the 
stock  of  the  Richmond  and  Danville,  as  well  as 
most  of  its  bond  issues,  remained  still  outstanding 
in  the  hands  of  the  public.    Consequently  the  only 
way  in  which  Brice  and  his  friends  could  save  the 
Richmond  and  Danville  property  from  completely 
breaking  up  was  to  merge  it  more  closely  with  the 
holding  company  in  some  way.     But  the  credit 
and  standing  of  the  holding  company  itself  were 
anything  but  high,  for  in  addition  to  paying  no 
dividends  it  had  piled  up  a  heavy  floating  debt  of 
its  own  and  had  a  poor  reputation  in  Wall  Street. 

The  situation  thus  becoming  acute,  the  manage- 
ment carried  through  a  remarkable  stock-juggling 
plan.  Instead  of  merging  the  Richmond  and  Dan- 
ville directly  into  the  West  Point  Terminal  Com- 
pany, the  directors  secretly  decided  to  turn  the 
Terminal  Company  assets  over  to  the  Richmond 
and  Danville  without  apprising  the  stockholders 
of  the  Terminal  Company.  In  conformity  with 
this  plan,  early  in  1886  the  Richmond  and  Dan- 
ville leased  the  Virginia  Midland,  the  Western 
North  Carolina,  and  the  Charlotte,  Columbia  and 


THE  RAILROAD  SYSTEM  OF  THE  SOUTH    185 

Augusta  ruilroads,  and  later  in  the  year  the  Colum- 
bia and  Greenville  and  certain  other  small  lines. 
At  about  the  same  time  the  Richmond  and  Dan- 
ville obtained  in  some  unknown  way  large  amounts 
of  the  Terminal  Company  stock,  a  portion  of  which 
it  now  issued  in  exchange  for  stocks  and  bonds  of 
certain  of  these  subsidiary  companies  which  it  had 
leased.  Having  carried  through  these  transfers, 
the  Richmond  and  Danville  then  threw  the  re- 
mainder of  its  Terminal  Company  stock  on  the 
market,  where  it  was  bought  by  investors  who 
knew  nothing  about  these  secret  transactions. 

The  Terminal  Company  was  now  left  high  and 
dry  so  far  as  the  Richmond  and  Danville  was  con- 
cerned. But  at  this  juncture  a  surprising  thing 
happened.  The  management  of  the  Terminal 
Company,  in  its  turn,  began  to  buy  shares  of  Rich- 
mond and  Danville  stock  and  in  a  short  time  re- 
gained its  former  control.  This  shifting  of  power 
exactly  reversed  the  situation  which  had  previ- 
ously existed,  when  the  Terminal  Company  itself 
had  been  controlled  by  the  Danville  Company. 
These  changes  were  followed  by  a  further  move 
on  the  part  of  the  Brice  and  Thomas  interests, 
which  now  formed  a  syndicate  and  turned  over  to 
the  Terminal  Company  a  majority  of  the  stock 


186  THE  RAILROAD  BUILDERS 

of  the  East  Tennessee  Company  for  $4,000,000 

in   cash   and  a  large   amount  of  new  Terminal 

Company  stock. 

When  these  transactions  had  been  accomplished, 
the  Terminal  Company  found  itself  once  more 
securely  in  control  of  the  entire  system,  and  the 
Brice  and  Thomas  interests  had  incidentally  very 
considerably  increased  their  fortunes  and  also  their 
hold  on  the  general  situation.     From  this  time, 
the  Terminal  Company   went  aggressively  for- 
ward in  an  ambitious  plan  for  further  expansion. 
By  acquiring  control  of  the  Central  Railroad  and 
Banking  Company  of  Georgia,  the  Terminal  man- 
agement was  involved  with  new  financial  inter  sts 
which  immediately  sought  to  control  the  system 
and  to  eliminate  the  Brice  and  Thomas  group. 
The  consequent   internal  contest  was  adjusted, 
however,  in  May.  1888,  by  electing  as  president 
John  H.  Inman,  a  man  who  had  been  identified 
with  the  Central  Railroad  of  Georgia  syslem. 

The  Richmond  Terminal  system  now  put  in 
motion  further  plans  for  expansion.  In  1890  it 
acquired  a  system  of  lines  extending  south  from 
Cincinnati  to  Vicksburg  and  Shreveport,  known 
as  the  Queen  and  Crescent  route,  and  in  the  mean- 
time made  a  close  alliance  with  the  Atlantic  Coast 


THE  RAILROAD  SYSTEM  OF  THE      JHTH    187 

Line  system.  By  the  end  of  1891  the  Richmond 
Terminal  system  embraced  over  8500  miles  of 
railroad,  while  the  Louisville  and  Nashville,  the 
next  largest  system  in  the  Southern  States,  had 
only  about  2400  miles. 

But  as  1891  opened,  the  vast  Richmond  Termi  • 
nal  system  was  perilously  near  financial  collapse. 
Notwithstanding  the  great  value  of  many  of  the 
lines,  its  physical  condition  was  poor;  the  liabili- 
ties and  capitalization  were  enormous;  and  much 
of  the  mileage  was  distinctly  unprofitable.  About 
this  time  many  disquieting  facts  began  to  leak 
out:  during  the  previous  year  the  Richmond  and 
Danville  had  been  operated  at  a  large  loss,  and 
this  fact  had  been  concealed  by  deceptive  entries 
on  the  books;  the  dividends  paid  on  the  Central 
Railroad  of  Georgia  stock  had  not  been  earned  for 
some  years;  and  the  East  Tennessee  properties 
were  hardly  paying  their  way. 

Various  investigating  committees  were  now  ap- 
pointed, and  finally  a  committee  headed  by  Fred- 
eric P.  Olcott  of  New  York  took  charge  and  worked 
out  a  complete  plan  of  reorganization.  The 
scheme,  however,  met  with  strenuous  opposition, 
and  thus  matters  dragged  on  into  the  panic  pe- 
riod of  1893,  when  the  entire  system  went  into 


11  THE  RAn.ROAD  BUILDERS 

bankruptcy  and  into  the  hands  of  receivers.  The 
various  sections  were  operated  separately  or  jointly 
by  receivers  during  this  unsettled  period,  and  it 
looked  for  some  time  as  though  an  effective  reor- 
ganization which  would  prevent  the  properties  from 
entirely  disintegrating  could  not  be  successfully 
accomplished. 

In  the  dark  days  of  1893,  after  Olcott  and  the 
Central  Trust  Company  had  failed  to  effect  a  re- 
organization of  the  Richmond  Terminal  system, 
a  new  interest  came  to  the  rescue,  represented  by 
the  firm  of  J.  P.  Morgan  and  Company,  whose 
growing  reputation  was  due  to  the  unusual  per- 
sonality of  J.  P.  Morgan  himself.    He  was  essen- 
tially an  organizer.    The  railroad  properties  which 
had  become  more  or  less  identified  with  the  Mor- 
gan interests  had  for  the  most  part  prospered.    It 
was  felt  that  Morgan's  banking-house  was  the 
only  one  in  Wall  Street  which  might  be  eqnal  to 
the  task.     The  proposal  was  made  to  him;  he  did 
not  invite  it.     In  fact,  it  is  said  that  for  some 
time  he  was  much  opposed  to  taking  hold  of  this 
disintegrated  and  broken-down  system  of  railroads 
operating  largely  in  poor  and  unprogressive  sec- 
tions, populated  for  the  most  part  by  negroes. 
Said  Morgan,  *' Niggers  are  lazy,  ignorant,  and 


THE  RAILROAD  SYSTEM  OF  THE  SOUTH    189 

unprogressive;  railroad  traffic  is  created  only  by 
industrious,  intelligent,  and  ambitious  people." 

After  months  of  discussion,  however,  Morgan 
finally  agreed  to  undertake  the  task,  and  out  of 
the  previous  chaos  there  emerged  the  Southern 
Railway  Company,  which  has  been  closely  iden- 
tified with  Morgan's  name  ever  since.  Probably 
of  the  many  railroad  systems  which  Morgan 
reorganized  from  1894  down  to  the  time  of  his 
death,  no  system  has  become  more  distinctly  a 
Morgan  property  than  the  Southern  Railway 
Company. 

The  plan  of  reorganization  whereby  this  great 
aggregation  of  loosely  controlled  and  poorly  man- 
aged Southern  railroads  was  welded  together  in- 
to an  efficient  whole  was  a  very  drastic  one  in 
its  effect  on  the  old  security  holders.  Debts  were 
slashed  down  everywhere,  assessments  were  levied, 
and  old  worthless  stock  issues  were  wiped  out. 
Valueless  sections  of  mileage  were  lopped  off,  and 
an  effort  was  immediately  made  to  strengthen 
those  of  real  or  promising  value.  Millions  of  dol- 
lars of  new  capital  were  spent  in  rebuilding  the 
main  lines;  terminals  of  adequate  scope  were  con- 
structed in  all  centers  of  population;  and  alliances 
were  made  with  connecting  links  with  a  view  to 


190  THE  RAILROAD  BUILDERS 

building  up  through  traffic  from  the  North  and 
the  West. 

The  first  ten  years  of  the  Southern  Railway  sys- 
tem under  the  Morgan  control  were  practically 
years  of  rebuilding  and  construction.    While  after 
ten  years  of  work  the  main  system  still  radiated 
through  most  of  the  territory  already  occupied  in 
a  crude  way  in  1894,  yet  it  had  acquired  a  large 
number  of  feeders  and  smaller  railroads  in  other 
sections.     The  Mobile  and  Ohio,  operating  with 
its  branches  about  one  thousand  miles  from  Mobile 
to  St.  Louis,  Missouri;  the  Georgia  Southern  and 
Florida,  furnishing  an  important  connection  from 
the  main  system  to  various  points  in  the  State  of 
Florida;  the  Alabama  Great  Southern,  operating 
in  and  near  the  Birmingham  district  of  Alabama  — 
all  these  properties  were  molded  into  the  system 
during  these  years.    The  system  was  then  rounded 
out  toward  the  North  and  consolidated  through 
joint  control,  with  the  Louisville  and  Nashville, 
of  the  Chicago,  Indianapolis  and  Louisville  Rail- 
road, which  operated  lines  northward  into  Ohio 
and  Illinois  and  on  to  Chicago.     Thus,  with  the 
lines  of  the  Queen  and  Crescent  route  running 
southward    from    Cincinnati    to    New    Orleans, 
the  svstem   secured  a  direct  through   line  from 


THE  RAILROAD  SYSTEM  OF  THE  SOUTH    191 

jts  various  southern  points  to  the  shores  of  the 
Great  Lakes. 

In  addition  to  these  developments,  the  manage- 
ment of  the  Southern  Railway  system  arranged 
direct  connection  with  Washington  through  the 
joint  acquisition  with  other  lines  of  the  Richmond, 
Fredericksburg  and  Potomac;  it  made  traflSc  ar- 
rangements with  the  Pennsylvania  and  the  Balti- 
more and  Ohio  systems  to  Baltimore,  Philadel- 
phia, and  New  York;  and  it  also  developed  close 
alliances  with  the  coastwise  steamships  plying 
northward  from  various  Southern  points. 

In  the  reorganization  of  1894  the  Central  of 
Georgia  Railway  system  was  cut  off  and  separately 
reorganized,  although  it  remained  under  the  con- 
trol of  Morgan  for  a  number  of  years.  Finally  in 
1907  Morgan  sold  his  Georgia  properties  to  Charles 
W.  Morse.  They  subsequently  passed  to  Edward 
H.  Harriman,  who  afterwards  merged  them  into 
the  Illinois  Central  system,  under  which  control 
they  have  since  remained. 

As  compared  with  the  old  Richmond  Ter- 
minal aggregation  with  its  broken-down  rails  and 
roadbed,  poor  equipment,  and  miserable  service, 
the  modem  Southern  Railway  system  shows  star- 
tling changes.     The  Southern  States  have  grown 


192  THE  RAILROAD  BUILDERS 

enormously  in  population  and  wealth  during  the 
last  generation;  the  industrial  activities  of  the 
South  at  the  present  time  are  elements  of  large  im- 
portance to  the  country  as  a  whole.  Cities  have 
vastly  increased  in  population;  new  towns  and 
manufacturing  districts  have  ^een  built  up;  and 
at  the  present  there  is  scarcely  mile  of  unprofit- 
able railroad  in  the  entire  9000  miles  under  opera- 
tion. In  recent  years  large  soft  coal  deposits 
have  been  discovered  and  developed  on  manj"^  of 
the  branch  lines,  and  today  the  coal  tonnage  of  the 
Southern  Railway  is  exceeding  the  relatively  un- 
stable lumber  tonnage  of  two  or  three  decades  ago. 


CHAPTER  XI 


THE  LIFE  WORK  OF  EDWARD   H.   HARRIMAN 


In  a  previous  chapter  there  has  been  related  the 
early  history  of  the  great  line  that  first  joined  the 
Atlantic  and  the  Pacific  Oceans  —  the  Union  Pa- 
cific. But  the  history  of  this  property  in  recent 
years  is  almost  as  startling  and  romantic  as  its 
story  in  the  sixties  and  seventies.  It  was  not  until 
recent  days  that  the  golden  dreams  entertained 
by  these  early  builders  came  true.  The  man  who 
really  reaped  the  harvest  and  who  at  the  same 
time  gave  the  Union  Pacific  that  position  among 
American  railroads  which  its  founders  foresaw  was 
the  last,  and  some  writers  think,  the  greatest  of  all 
American  railroad  leaders. 

The  Union  Pacific,  a  bankrupt  railroad  in  1893, 
lay  quiescent  under  the  stress  of  the  hard  times 
that  lasted  until  1898.  The  long  story  of  its  trib- 
ulations hardly  made  it  a  tempting  morsel  for  the 
men  who  were  then  most  active  in  the  railroad  field. 

193 


13 


194  THE  RAILROAD  BUILDERS 

In  1895  or  1896  the  several  protective  committees 
which  had  been  appointed  to  look  after  the  inter- 
ests of  stockholders  and  defaulted  bondholders 
had  tried  to  induce  J.  P.  Morgan  to  undertake 
the  reorganization,  but  he  had  refused.  To  reor- 
ganize the  Union  Pacific  meant  that  not  far  from 
one  hundred  millions  of  new  capital  would  sooner 
or  later  have  to  be  supplied,  and  there  was  no 
other  banking-house  in  America  at  that  time  which 
seemed  strong  enough  for  the  task.  Smaller  con- 
cerns were  all  involved  in  the  Morgan  syndicates 
or  in  other  undertakings,  and  a  combination  of 
these  at  the  moment  seemed  out  of  the  question. 

About  this  time  the  German-Jewish  banking- 
house  of  Kuhn,  Loeb  and  Company  began  looking 
into  the  situation.  Kuhn,  Loeb  and  Company  were 
known  as  a  very  conservative  but  very  rich  con- 
cern with  close  connections  in  Frankfort  and  Ber- 
lin. Though  it  had  been  long  established  in  New 
York  it  had  not  been  identified  with  the  railroad 
reorganization  movement  nor  had  it  been  promi- 
nent as  an  investing  or  underwriting  institution. 
But  now  the  active  partner  of  the  busiuess,  Jacob 
H.  Schiff,  set  out  seriously  to  persuade  the  vari- 
ous committees  to  adopt  a  plan  of  reorganization 
which  he  had  devised.     Though  he  made  some 


LIFE  WORK  OP  EDWARD  H.  HARRIMAN    195 

progress,  he  soon  found  much  secret  opposition  and 
thought  that  Morgan  might  be  quietly  attempting 
to  secure  the  property.  Morgan,  however,  was  not 
interested.     The  mystery  was  still  unsolved. 

The  fact  was  that  Edward  H.  Harriman,  who 
for  some  years  past  had  been  a  powerful  influence 
in  the  affairs  of  the  Illinois  Central  Railroad  but 
who  was  unknown  to  the  average  Wall  Street 
promoter  and  totally  unheard  of  throughout  the 
country,  had  made  up  his  mind  to  reorganize  the 
Union  Pacific  Railroad.  He  therefore  began  to 
work  quietly  with  various  interests  in  an  attempt 
to  tie  up  the  property.  But  soon  he,  like  Schiff, 
encountered  serious  opposition.  He  also  imme- 
diately jumped  to  the  conclusion  that  Morgan  was 
secretly  at  work,  and  he  called  on  Morgan  for  the 
facts.  Morgan  replied,  as  he  had  replied  to  Schiff, 
that  he  was  not  interested,  but  that  he  wished 
Harriman  success. 

As  Schiff  continued  to  meet  with  difficulty, 
he  soon  called  on  Morgan  again.  Again  Morgan 
replied  that  he  was  not  interested.  "But,"  he 
said,  "I  think  if  you  will  go  and  see  a  chap  named 
E.  H.  Harriman  you  may  find  out  something." 

Who  was  Harriman?  Schiff  had  hardly  heard 
of  him  and  had  never  met  him.    How  could  a  small 


196  THE  RAILROAD  BUILDERS 

man  like  Harriman,  with  no  money,  no  powerful 
friends,  no  big  financial  backing,  reorganize  a  great 
system  like  the  Union  Pacific  Railroad?   The  idea 
seemed  ridiculous.     Nevertheless,  as  the  opposi- 
tion continued,  Schiff  soon  got  in  touch  with  Harri- 
man.  In  the  course  of  a  conference,  he  warned  this 
daring  interloper  to  keep  his  hands  off  the  Union 
Pacific.    But  Harriman  was  not  moved  by  threats. 
On  the  contrary,  he  insisted  that  SchifF  should 
leave  the  Union  Pacific  alone;  that  he  himself  had  al- 
ready worked  out  his  plans  to  reorganize  it.   Schiff 
laughed  at  this  idea,  termed  it  chimerical,  and  as- 
serted that  Kuhn,  Loeb  and  Company  were  easily 
able  to  obtain  the  needed  one  hundred  millions  or 
more  through  their  foreign  connections  on  a  basis 
of  from  four  to  five  per  cent,  and  that  in  America 
no  such  sum  of  new  capital  could  at  that  time  be 
raised  through  banking  activities  at  better  than 
six  or  seven  per  cent. 

Harriman  then  sprang  his  surprise  on  Schiff. 
For  some  years  he  had  been  financially  inter- 
ested in  the  affairs  of  the  Illinois  Central.  This 
property  had  at  that  time  higher  credit  than 
any  other  American  railroad;  it  had  raised  large 
sums  of  capital  in  Europe  on  as  low  a  basis  as 
three  per  cent,  and  on  most  of  its  bonds  paid  only 


LIFE  WORK  OF  EDWARD  H.  HARRIMAN    197 

three  and  one-half  per  cent  interest.  For  nearly 
fifty  years  the  property  had  been  paying  dividends 
with  hardly  an  interruption,  and  altogether  it  had 
an  enviable  reputation  as  one  of  the  soundest 
investments.  Harrinian's  influence  in  the  affairs 
of  the  company  had  been  increasing  quietly  for 
years;  the  management  had  been  left  almost  com- 
pletely in  his  hands;  and  the  directors  were  in  eflfect 
largely  his  puppets,  and  a  majority  would  do  his 
bidding  in  almost  anything  he  might  propose. 

Harriman  now  announced  to  Schiff  that  he  in- 
tended to  have  the  Union  Pacific  reorganized  as  an 
appendage  of  the  Illinois  Central.  The  necessary 
one  hundred  millions  would  be  raised  by  a  first 
mortgage  on  the  entire  Union  Pacific  lines  at  three 
per  cent,  and  the  mortgage  would  be  guaranteed 
by  the  Illinois  Central,  while  the  latter  company 
would  receive  a  majority  of  the  new  Union  Pacific 
stock  in  consideration  for  giving  its  guarantee. 

Here  was  j,  poser  for  SchiflF,  who  saw  at  once 
that  if  Harriman  could  use  the  Illinois  Central 
credit  in  this  way,  he  certainly  could  carry  out  his 
plan.  Schiff  soon  fouud  that  Harriman  would 
have  no  difficulty  in  using  Illinois  Central  credit. 
The  upshot  of  the  matter  was  that  the  two  men 
got  together  and  jointly  reorganized  the  Union 


198  THE  RAILROAD  BUILDERS 

Pacific.  Harriman  was  made  chairman  of  the 
Board  of  Directors,  and  Kuhn,  Loeb  and  Com- 
pany became  the  permanent  bankers  for  the  new 
railroad  system. 

Thus  with  one  bound  Harriman  had  leaped  to 
the  forefront  in  American  railroad  finance  and  by 
a  bold  act  which  was  characteristic  of  the  man. 
For  Edward  H.  Harriman  was  not  only  a  hard- 
headed,  practical  business  builder  who  like  Morgan 
thought  in  big  figures,  but  he  was  also  a  bold 
plunger,  which  Morgan  was  not.   Possessing  a  viv- 
id imagination,  he  not  only  saw  far  into  the  future 
but  he  also  planned  far  into  that  same  future. 
Morgan  was  also  a  man  of  vision,  but  his  vision 
did  not  carry  him  far  beyond  the  present.    The 
things  Morgan  saw  best  were  those  immediately 
before  him,  while  the  things  that  Harriman  saw 
best  were  at  a  distance.    Morgan's  big  plans  of 
procedure  were  based  on  what  he  saw  in  a  business 
way  in  the  near  future;  he  reorganized  his  railroads 
with  tho  idea  of  making  them  pay  their  way  as 
soon  as  possible  and  of  showing  a  good  return  on 
the  capital  invested.     He  thought  little  of  what 
might  be  the  outcome  a  decade  or  two  hence  or  of 
what  combinations  might  later  be  worked  on  the 
chessboard  as  a  result  of  his  immediate  moves. 


LIFE  WORK  OF  EDWARD  H.  HARRIMAN    19* 

Morgan's  mind   was    not  philosophical;  it   was 
intensely  practical. 

While  Morgan  declined  the  proffered  control  of 
the  Union  Pacific  on  the  theory  that  it  was  only 
a  "streak  of  rust"  running  through  a  sparsely 
settled  country  and  across  an  arid  desert,  Harri- 
man  dreamed  of  the  great  undeveloped  West  fill- 
ing up  with  people  during  the  following  genera- 
tion, of  the  empty  plains  being  everywhere  put 
under  cultivation,  and  of  the  arid  desert  respond- 
ing to  the  effects  of  irrigation  on  a  large  and 
comprehensive  scale.  He  foresaw  the  wonderful 
future  of  the  Pacific  States  —  the  opening  up  of 
natural  resources  in  the  mountains,  the  steady 
stream  of  jul  nd  women  who  would  ultimately 
emigrate  to  this  vast  section  from  the  East  and 
from  foreign  lands  and  who  would  build  up  towns 
and  great  cities.  At  the  same  time,  with  that 
practical  mind  of  his,  Harriman  calculated  that 
the  Union  Pacific  Railroad  —  situated  in  the  heart 
of  this  huge  area,  having  the  most  direct  and 
shortest  line  to  the  Pacific,  and  with  all  traffic 
from  the  East  converging  over  half  a  dozen  feed- 
er lines  to  Omaha  and  Kansas  City  —  would  haul 
enormous  amounts  of  tonnage  just  as  soon  as 
the  Western  country  revived  from  the  depression 


SOO  THE  RAILROAD  BUILDERS 

under  which  it  had  been  struggling  for  half  ft 

dozen  years. 

When  Harriman  took  hold  of  the  Union  Pacific 
he  had  already  determined  to  absorb  the  Oregon 
lines,  with  their  tributaries  running  up  into  the 
Puget  Sound  country  and  to  the  Butte  mining 
district;  to  get  hold  of  the  Southern  Pacific  prop- 
erties at  the  earliest  possible  moment;  and  to  link 
the  Illinois  Central  in  some  way  to  the  Union  Paci- 
fic so  that  the  latter  would  have  its  own  independ- 
ent outlets  to  Chicago  and  St.  Louis.  All  these 
plans  he  ultimately  accomplished,  as  well  as  many 
others,  some  of  which  his  farseeing  imagi'ration 
may  have  conceived  then. 

While  Harriman  was  able  very  promptly  to 
carry  through  his  first  scheme  and  recapture  the 
Oregon  lines,  which  had  been  separately  reorgan- 
ized as  a  result  of  the  receivership,  he  found  it  a 
far  more  diflBcult  matter  to  secure  a  dominating 
interest  in  the  great  system  of  railroads  controlled 
by  CoUis  P.  Huntington.    Huntington  was  a  hard 
man  to  deal  with.    Himself  one  of  the  practical 
railroad  magnates  of  his  time,  he  also  had  the  gift 
of  vision  and  undoubtedly  foresaw  that  the  ulti- 
mate result  must  be  a  consolidation  of  the  prop- 
erties; but  he  fully  expected  that  his  company 


LIFE  WORK  OF  EDWARD  H.  HARRIMAN   Ml 

would  absorb  the  Union  Pacific.  Had  it  not  been 
that  during  the  panic  period  the  Southern  Pacific 
had  heavy  loads  of  its  own  to  carry  and  that  its 
credit  was  none  too  high,  Huntington  might  then 
have  attempted  to  gain  control  of  the  Union  Pacific. 

Events  finally  worked  to  the  benefit  of  Harri- 
man.  When  CoUis  P.  Huntington  died  in  1900, 
it  was  in  most  people's  minds  only  a  question  of 
time  as  to  when  the  powerful  Harriman  interests 
would  take  over  the  Southern  Pacific  p-operties. 
Consequently  there  was  no  surprise  when  in  1901 
announcement  was  made  that  the  Union  Pacific 
had  purchased  the  holdings  of  the  Huntington 
estate  in  the  Southern  Pacific  Company  and  was 
therefore  in  virtual  control. 

By  a  master  stroke  the  railroad  situation  in  the 
West  had  been  radically  changed.  The  Hunting- 
ton system  comprehended  many  properties  of  large 
and  growing  value,  which  were  now  feeling  the  full 
benefit  of  the  agricultural  prosperity  at  that  time 
spreading  throughout  the  great  Southwest.  Aside 
from  this  pri^e,  the  Union  Pacific  acquired  the 
main  line  to  the  Pacific  coast  which  it  had  always 
coveted  and  thus  added  to  its  system  over  nine 
thousand  miles  of  railroad  and  over  four  thousand 
miles  of  water  lines,  besides  obtaining  a  grip  on  the 


20«  THE  RAILROAD  BUILDERS 

railroad  empire  of  this  entire  portion  of  the  con- 
tinent not  to  be  readily  loosened  by  competitors. 

At  the  same  time  that  Harriman  was  strengthen- 
ing his  position  on  the  west  and  south,  the  Great 
Northern  and  Northern  Pacific  properties,  both 
now  operated  under  the  definite  control  of  James 
J.  Hill,  were  following  a  policy  of  expansion  fully 
as  gigantic  as  that  of  the  Union  Pacific.     The 
Great  Northern  lines  operating  from  Duluth  to 
the  Pacific  coast  had  become  powerful  elements  in 
the  Western  railroad  situation,  and  Hill  had  de- 
vised many  plans  for  diverting  to  the  north  the 
through  traflSc  coming  from  the  central  section 
of  the  continent.     He  had  established  on  the  Great 
Lakes  a  line  of  steamships  running  from  Duluth 
to  Buffalo,  and  was  also  operating  on  the  Pacific 
Ocean  steamship  lin  s  which  gave  him  a  connection 
with  Japan,  China,  and  other  oriental  countries. 

After  the  reorganization  of  the  Northern  Pacific 
Railroad,  which  fell  under  the  domination  of  Mor- 
gan, the  affiliations  of  the  Hill  and  Morgan  inter- 
ests became  very  close,  and  in  a  short  time  Hill  had 
as  secure  a  grip  on  the  Northern  Pacific  as  he  had 
always  had  on  the  Great  Northern.  This  powerful 
combination  looked  like  a  menace  to  the  Harri- 
man-Kuhn-Loeb  interests   which  controlled  the 


t 


LIFE  WORK  OF  EDWARD  H.  HARRIMAN    20S 

territory  to  the  south  and  radiated  throughout  the 
State  of  Oregon.    When,  therefore,  the  Northern 
Pacific  began  a  little  later  to  build  into  territory 
in  Oregon  and  Washington  which  the  Union  Pacific 
regarded  as  a  part  of  its  own  preserves,  much  bad 
feeling  was  engendered  between  the  two  interests. 
Matters  were  brought  to  a  climax  in  the  spring  of 
1901  when  the  Harriman  people  suddenly  made 
the  discovery  that  the  Hill-Morgan  combination 
had  been  quietly  buying  control  of  the  valuable 
Chicago,  Burlington  and  Quincy  Railroad,  which 
operated  a  vast  system  west  and  northwest  of 
Chicago,  penetrated  as  far  into  the  Union  Pacific 
main-line  territory  as  Denver,  and  connected  at 
the  north  with  the  eastern  terminals  of  both  the 
Great  Northern  and  Northern  Pacific  systems. 
This  move  meant  but  one  thing  to  Harriman:  the 
Hill-Morgan  interests  were   trying  to  surround 
the  Union  Pacific  and  make  it  powerless,  just  as 
the  Southern  Pacific  had  attempted  to  do  many 
years  before. 

Harriman  now  played  one  of  his  bold  strokes. 
He  immediately  began  to  purchase  Northern  Pa- 
cific stock  in  the  open  market  in  order  to  secure 
control  of  that  property.  It  was  well  known  that 
while  the  Hill-Morgan  alliance  dominated   the 


204  THE  RAILROAD  BUILDERS 

Northern  Pacific,  it  did  not  actually  own  a  major- 
ity of  the  stock,  and  to  secure  this  majority  was 
Harriman's  purpose.     This  move  would  effectu- 
ally check  the  invasion  of  the  Union  Pacific  terri- 
tory by  giving  the  Harriman  interests  a  voice  in 
the  control  of  the  Chicago,  Burlington  and  Quincy. 
The  price  of  Northern  Pacific  common  stock 
soared  day  after  day  until  on  May  9,  1901,  it 
sold  at  $1000  a  share,  and  a  momentary  panic 
ensued.    At  the  time  Morgan  was  on  the  ocean 
and  could  not  be  reached,    ^iis  partners  were  ap- 
parently not  equal  to  the  emergency.    But  Harri- 
man was.    When  the  panic  reached  its  height,  both 
interests  had  purchased  far  more  than  a  majority 
of  Nort'  -rn  Pacific  stock  —  in  contracts  for  future 
delivery.    It  was  seen  that  to  insist  on  the  delivery 
of  shares  which  did  not  exist  would  not  only  bank- 
rupt every  "  short "  speculator,  large  and  small,  but 
would  undoubtedly  bring  all  Wall  Street  tum- 
bling down  like  a  house  of  cards.    So,  in  the  midst 
of  the  excitement,  the  two  interests  reached  a 
compromise. 

The  outcome  was  the  formation  of  the  Northern 
Securities  Company  with  a  capital  of  $400,000,000, 
nearly  all  of  which  was  issued  to  acquire  the  capi- 
tal stocks  of  the  Northern  Pacific  and   Great 


LIFE  WORK  OF  EDWARD  H.  HARRIMAN   205 

Northern  railroads.  All  the  properties,  including 
the  Burlington,  thus  came  under  the  joint  control 
of  the  Harriman  and  Hill  groups.  The  division 
of  territory  on  both  the  east  and  the  west  was 
worked  out  amiv^ably:  the  Northern  Pacific  aban- 
doned some  of  its  plans  for  extensions  in  Oregon, 
and  the  Burlington  system  remained  as  it  was, 
with  the  understanding  that  no  extensions  should 
be  built  to  the  Pacific  coast.  Later  the  Burlington 
acquired  control  of  a  cross-country  system,  the 
Colorado  Southern,  extending  south  to  the  Gulf, 
but  to  this  day  has  made  no  attempt  to  build 
beyond  the  lines  it  owned  to  Wyoming  in  1901. 

As  is  well  known,  the  Northern  Securities  Com- 
pany was  subsequently  declared  to  exist  in  viola- 
tion of  the  Sherman  Anti-Trust  Act,  and  on  a 
decision  of  the  United  States  Supreme  Court  in 
1904  it  was  practically  dissolved  and  all  its  securi- 
ties were  returned  to  the  original  holders.  This 
dissoiution  left  the  Hill-Morgan  interests  in  undis- 
puted control  of  the  Burlington  properties,  but 
harmonious  relations  had  in  the  meantime  been 
established  among  the  contestants,  assuring  an 
equitable  division  of  territory  and  traflBc.  The 
final  outcome  was  that  the  Union  Pacific  Railroad 
Company,  which  had  purchased  with  its  large 


206  THE  RAILROAD  BUILDERS 

surplus  and  by  the  use  of  its  high  credit  many 
million  dollars'  worth  of  the  capital  stocks  of  the 
Great  Northern  and  Northern  Pacific  railroads, 
received  these  stocks  back  after  several  years  of 
great  prosperity  and  after  the  appreciation  in  the 
market  values  of  the  stocks  had  exceeded  $60,000,- 
000.  There  was  no  further  necessity  for  holding 
them  and  most  of  the  stocks  were  sold  at  the  high 
prices  of  1905  and  1906,  with  actual  net  profit  for 
the  Union  Pacific  Railroad  in  excess  of  $50,000,000. 
No  such  gigantic  financial  transaction  as  this  had 
ever  before  bee-^  carried  through  by  an  American 
railroad  corporation. 

With  an  overflowing  treasury  in  the  Union 
Pacific,  Harriman  immediately  turned  his  face 
toward  the  East.  It  had  for  years  been  one  of 
his  dreams  to  control  a  continuous  line  of  railroad 
from  the  Atlantic  to  the  Pacific.  As  early  as  1902 
he  had  all  but  completed  negotiations  for  the  acqui- 
sition of  the  New  York  Central  lines  in  the  inter- 
est of  the  Union  Pacific;  but  this  plan  had  met 
with  opposition  from  the  Vanderbilts  and  Morgan 
and  had  been  dropped.  Harriman  now  took  ad- 
vantage of  an  opportunity  which  presented  it- 
self to  acquire  for  the  Union  Pacific  what  was  prac- 
tically a  dominating  interest  in  the  Baltimore 


I 


LIFE  WORK  OF  EDWARD  H.  HARRIMAN    207 
and  Ohio,  a  large  block  of  whose  stock  was  dis- 
posed of  by  the  Pennsylvania  Railroad.     Harri- 
man  had  already  largely  added  to  the  Union  Pa- 
cific's holdings  in   the  Illinois  Central.    Jointly 
with  the  Lake  Shore  of  the  Vanderbilt  system, 
the  Baltimore  and  Ohio  had,  as  already  described, 
acquired  a  dominating  interest  in  the  Reading 
Company,  including  all  the  latter  company's  in- 
terests and  afiBliations  as  well  as  its  entry  into  the 
New  York  district  through  control  of  the  Central 
Railroad  of  New  Jersey.    Harriman,  therefore,  by 
a  single  stroke,  now  found  himself  in  practical  pos- 
session of  a  coast-to-coast  system  of  railroads 
extending  all  the  way  from  New  York  to  San 
Francisco,  Portland,  and  Los  Angeles,  and  passing 
through  all  the  important  cities  of  the  country. 
The  Illinois  Central  system,  operating  nearly  five 
thousand  miles  of  road  southward  from  Chicago 
to  New  Orleans,  passing  through  St.  Louis,  with 
an  arm  reaching  out  to  Sioux  City  on  the  west 
and  a  network  of  branches  covering  the  Middle 
States,  had  thus  become  the  great  link  welding  to- 
gether the  eastern  and  western  Harriman  systems. 
Later  the  Union  Pacific  acquired  large  interests 
in   other  properties   and   purchased   substantial 
amounts  of  stock  in  the  Atchison,  Topeka  and 


208  THE  RAILROAD  BUILDERS 

Santa  Fe,  the  New  York  Central,  the  St.  Paul, 
and  the  Chicago  and  North  Western  railroads.     It 
also  acquired  a  dominating  interest  in  the  Chicago 
and  Alton  property,  operating  from  Chicago  to 
St.  Louis,  with  Western  branches.    In  the  panic 
period  of  1907,  Harriman  personally  purchased 
from  Charles  W.  Morse,  who  had  acquired  the 
property  from  Morgan  a  short  time  before,  the 
entire  capital  stock  of  the  Central  of  Georgia  Rail- 
way, which  he  later  turned  over  to  the  Illinois 
Central.     The  Central  of  Georgia  lines  connect 
at  several  points  with  the  Illinois  Central  and  have 
given  the  system  various  outlets  on  the  South 
Atlantic  seaboard. 

Harriman  died  in  September  of  1909,  and  with 
his  death  the  wizard  touch  was  clearly  gone.  What 
would  have  been  the  later  history  of  the  Union 
Pacific  had  he  lived  can  be  only  conjectured.  The 
new  management,  with  Judge  Robert  S.  Lovett 
at  its  head,  continued  the  broad  and  eflScient  opera- 
tion which  had  characterized  Mr.  Harriman's  re- 
gime, but  it  soon  abandoned  the  policy  of  further 
growth  and  expansion.  This  alteration  in  policy, 
however,  was  perhaps  more  the  result  of  changing 
conditions  than  of  relinquishment  of  Harriman's 
aims.    Many  new  laws  for  the  regulation  of  the 


LIFE  WORK  OF  EDWARD  H.  HARRIMAN    209 

railways  had  been  passed,  and  in  1906  the  pow- 
ers of  the  Interstate  Commerce  Commission  were 
greatly  augmented.  A  period  of  reform  had  now 
begun,  and  after  1909  a  wave  of  "progressivism" 
overspread  the  country.  New  interpretations  were 
given  to  the  Sherman  Act,  and  suits  were  soon 
under  way  against  all  the  railroads  and  industrial 
combinations  which  appeared  to  be  infringing  that 
statute.  The  great  Standard  Oil  and  Tobacco 
trusts  were  dissolved  in  this  period,  and  a  suit 
which  was  b/ought  to  divorce  the  Union  Pacific  and 
the  Southern  Pacific  Company  was  finally  decided 
against  the  Union  Pacific,  with  the  result  that  the 
two  big  properties  were  separated.  The  Union 
Pacific  turned  a  large  amount  of  its  Southern 
Pacific  stock  holdings  over  to  the  Pennsylvania 
Railroad,  in  exchange  for  which  it  received  from 
the  Pennsylvania  the  remainder  of  the  Baltimore 
and  Ohio  stock  which  the  Pennsylvania  interests 
had  retained  after  the  sale  to  the  Union  Pacific  in 
1906.  Immediately  after  this,  the  Union  Pacific 
management,  seeing  no  particular  advantage  in 
retaining  an  interest  in  the  Baltimore  and  Ohio, 
gave  the  shares  to  its  own  stockholders  in  a  special 
dividend. 

Thus,  since  Harriman's  death,  the  Union  Pacific 


u 


210  THE  RAILROAD  BUILDERS 

Railroad  has  once  more  returned  to  very  much 
its  original  condition  prior  to  its  acquisition  of  the 
Southern  Pacific.  It  still  controls  the  Illinois  Cen- 
tral and  the  Chicago  and  Alton  and  has  invest- 
ment interests  in  a  large  number  of  other  railroads. 
It  is  still  the  premier  system  of  the  West  and 
promises  to  remain  so  indefinitely;  but  the  bold 
Harriman  touch  is  gone  and  will  never  return. 


CHAPTER  Xn 


THE  AMERICAN  RAILROAD    PROBLEM 

During  the  last  fifty  years  the  railroad  has  per- 
haps been  most  familiar  to  the  American  people 
as  a  "problem."    As  a  problem  it  has  figured  con- 
stantly in  politics  and  has  held  an  important  posi- 
tion in  many  political  campaigns.   The  details  that 
comprise  this  problem  have  been  indicated  to  some 
extent  in  the  preceding  pages  — the  speculative 
character  of  much  railroad  building,  the  rascality 
of  some  railroad  promoters,  the  corrupting  influ- 
ence which  the  railroad  has  too  frequently  exerted 
in  legislatures  and  even  in  the  courts.     The  at- 
tempts to  subject  this  new  "monster"  to  govern- 
ment regulation  and  control  have  furnished  many 
of  the  liveliest  legislative  and  judicial  battles  in 
American  history.    Farmers,  merchants,  manufac- 
ture! -  and  the  traveling  public  have  all  had  their 
troubles  with  the  transportation  lines,  and  the 

difficulties  to  which  these  struggles  have  given  rise 

til 


Hi  THE  RAILROAD  BUaDERS 

have  produced  that  problem  which  is  even  now 

apparently  far  from  solution. 

Railroads  had  been  operating  for  many  years  m 
this  country  before  it  dawned  upon  the  farmers 
that  this  great  improvement,  which  many  had 
hailed  as  his  greatest  friend,  might  be  his  greatest 
enemy.    It  had  been  operating  for  several  decades 
in  the  manufacturing  sections  before  the  enterpris- 
ing industrialist  discovered  that  the  railroad  might 
not  only  build  up  his  business  but  also  destroy  it. 
From  these  discoveries  arose  all  those  discordant 
cries  of  "extortion,"   ♦'rebate,"  "competition, 
-long  haul  and  short  haul,"  "regulation,"  and 
-government  ownership."  which  have  given  rail- 
road  literature  a  vocabulary  all  its  own  and  have 
written  new  chapters  in  the  science  of  economics 
The  storm  center  of  all  this  agitation  concerned 
primarily  one  thing  --  the  amount  which  the  rail- 
road might  fairly  charge  for  transporting  passen- 
gers and  freight.    The  battle  of  the  people  with  the 
railroads  for  fifty  years  has  been  the  "battle  of  the 
rate  "    This  has  taken  mainly  two  forms,  the  agra- 
rian agitation  of  the  West  against  transportation 
charges,  and  the  fight  of  the  manufacturing  centers, 
mainly  in  the  East,  against  discriminations.    Per- 
haps its  most  characteristic  episodes  have  been 


THE  AMERICAN  RAILROAD  PROBLEM  «1S 

the  fight  of  the  "Grangers"  and  their  successors 
against  the  trunk  lines  and  that  of  the  general 
public  against  the  Standard  Oil  Company. 

Even  in  the  fifties  and  the  sixties,  the  American 
public  had  its  railroad  problem,  but  it  was  quite 
different  in  character  from  the  one  with  which  we 
have  since  grown  so  familiar.  The  problem  in  this 
earlier  period  was  merely  that  of  getting  more  rail- 
roads. The  farmer  pioneers  in  those  days  were  not 
demanding  lower  rates,  better  service,  and  no  dis- 
crimination and  anti-pooling  clauses;  they  asked 
for  the  building  of  more  lines  upon  practically  any 
terms.  This  insistence  on  railroad  construction  in 
the  sixties  explains  to  a  great  extent  the  difficulties 
subsequently  encountered.  In  a  large  number  of 
cases  railroad  building  became  a  purely  speculative 
enterprise;  the  capitalists  who  engaged  in  this 
business  had  no  interest  in  transportation  but  were 
seeking  merely  to  make  their  fortunes  out  of  con- 
structing the  lines.  Not  infrequently  the  farmers 
themselves  furnished  a  considerable  amount  of 
money,  expecting  to  obtain  not  only  personal  divi- 
dends on  the  investment  but  larger  general  divi- 
dends in  the  shape  of  cheap  transportation  rates 
and  the  development  of  the  country.  Even  when 
the  builders  were  more  honest,  their  mistaken 


814  THE  RAILROAD  BUILDERS 

enthusiasm  had  consequences  which  were  similarly 
disastrous.     The  simple  fact  is  that  a  considerable 
part  of  the  Mississippi  Valley,  five  or  ten  years 
after  the  Civil  War,  found  itself  in  the  possession 
of  railroads  far  in  excess  of  the  public  need.    In  the 
long  run  this  state  of  affair    was  probably  not  a 
great  economic  evil,  for  it  stimulated  development 
on  a  tremendous  scale;  but  its  temporary  effect 
was  disastrous  not  only  to  the  railroads  themselves 
but  to  the  struggling  population.    The  farmer  had 
mortgaged  his  farm  to  buy  stock  in  the  road;  and 
his  town  or  county  or  State  had  subsidized  the  line 
by  borrowing  money  which  it  frequently  could  not 
repay.   When  this  property  became  bankrupt,  not 
only  wiping  out  these  mvestments  but  leaving  the 
agricultural  population  at  the  mercy  of  what  it 
reguided  as  exorbitant  rates  and  all  kinds  of  unfair 
discriminations  with  high  interest  charges  on  its 
mortgages  and  high  local  taxes,  the  blind  fury  that 
resulted  among  the  farmers  was  not  unnatural. 

Many  of  the  railroad  evils  were  inherent  in  the 
situation;  they  were  explained  by  the  fact  that 
both  managers  and  public  were  dealing  with  a  new 
agency  whose  laws  they  did  not  completely  under- 
stand. But  the  mere  play  of  personal  forces  in 
themselves  aggravated  the  antagonism.    The  fact 


THE  AMERICAN  RAILROAD  PROBLEM  215 

that  most  of  the  railroad  magnates  lived  in  the  East 
added  that  element  of  absentee  landlordism  which 
is  essential  to  most  agrarian  problems.  Many  of 
the  Western  capitalists  were  real  leaders;  yet  it  is 
only  necessary  to  remember  that  the  most  active 
man  in  Western  railroads  in  the  seventies  was  Jay 
Gould,  to  understand  the  suspicion  m  which  the 
railroad  promoter  of  that  day  was  generally  held. 
It  is  significant  that  of  all  the  existing  railroad 
abuses,  the  one  which  seemed  to  arouse  particular 
hostility  was  the  free  pass.  There  were  many 
greater  practical  evils  than  this,  yet  the  fact  that 
most  editors  and  public  officials  and  politicians  and 
legislators  and  even  many  judges  rode  "deadhead " 
was  a  constant  reminder  of  the  influence  which 
this  "  alien  "  power  exercised  over  the  government 
and  the  public  opinion  of  the  communities  of  which 
it  was  theoretically  the  servant.  Many  of  these 
roads  had  a  greater  income  than  the  States  they 
served;  their  payrolls  were  much  larger;  their  head 
officials  received  higher  salaries  than  governors 
and  presidents.  The  extent  to  which  these  roads 
controlled  legislatures  and,  as  it  seemed  at  times, 
even  the  courts  themselves,  alarmed  the  people. 
The  stock-jobbing  that  had  formed  so  large  a  part 
of  their  history  added  nothing  to  their  popularity. 


216  THE  RAILROAD  BUILDERS 

Yet,  when  all  these  charges  against  the  railroads 
are  admitted,  the  fundamental  difficulty  was  one 
which,  at  that  stage  of  public  enlightenment,  was 
beyond  the  power  of  individuals  to  control.  Nearly 
all  the  deep-seated  evils  arose  from  the  fret  that 
the  railroads  were  attempting  to  do  something 
which,  in  the  nature  of  the  case,  they  were ..  atirely 
unfitted   to  do— that   is,   compete  against  one 
another.     When  the  great  trunk  lines  were  con- 
structed, the  idea  that  competition  was  the  life  of 
trade  held  sway  in  America,  and  the  popular  im- 
pression prevailed  that  this  rule  would  apply  to 
railroads  as  well  as  to  other  forms  of  business. 
To  the  few  farseeing  prcphets  who  predicted  the 
difficulties  which  subsequently  materialized,  the 
answer  was  always  made  that  competition  would 
protect  the  public  from  extortion  and  other  abuses. 
But  competition  between  railroads  is  well-nigh 
impossible.     Only   in   case   different   companies 
operated  their  cars  upon  the  same  roadbed- 
something  which,  in  the  earliest  days,  they  actually 
did  on  certain  lines  ~  could  they  compete,  and 
any  such  system  as  a  general  practice  is  clearly 
impracticable.    One  railroad  which  paralleled  an- 
other in  all  its  details  might  compete  with  it, 
but  there  are  almost  no  routes  that  can  furnish 


THE  AMERICAN  RAILROAD  PROBLEM     17 

business  enough  for  two  such  lines,  and  the  carry- 
ing out  of  such  an  idea  involves  a  waste  of  capital 
on  an  enormous  scale.  Probably  the  country  re- 
ceived its  most  striking  illustration  of  this  when 
the  West  Shore  Railroad  in  New  York  State  was 
built  almost  completely  duplicating  the  New  York 
Central,  with  the  result  that  both  roads  were 
nearly  bankrupted. 

While  no  one  railroad  can  completely  duplicate 
another  line,  two  or  more  may  compete  at  particu- 
lar points.  By  1870  this  contingency  had  produced 
what  was  regarded  as  the  greatest  abuse  of  the 
time  —  the  familiar  problem  of  "long  and  short 
haul."  Two  or  more  railroads,  starting  at  an 
identical  point,  would  each  pursue  a  separate 
course  for  several  hundred  miles  and  then  suddenly 
come  together  again  at  another  large  city.  The 
result  was  that  they  competed  at  terminals,  but 
that  each  existed  as  an  independent  monopoly  at 
intermediate  points.  The  scramble  for  business 
would  thus  cause  the  roads  to  cut  rates  furiously 
at  terminals;  but  since  there  was  no  competition 
at  the  intervening  places  the  rates  at  these  points 
were  kept  up,  and  sometimes,  it  was  charged,  were 
raised  in  order  to  compensate  for  losses  at  the 
terminals.    Thus  resulted   that  anomaly  which 


218  THE  RAILROAD  BUILDERS 

strikes  so  strangely  the  investigator  of  the  railroad 
problem  —  that  rates  apparently  have  no  relation 
to  the  distance  covered,  and  that  the  charge  for 
hauling  a  load  for  seventy-five  miles  may  be  ac- 
tually higher  than  that  for  hauling  the  same  load 
one  hundred  or  one  hundred  and  fifty  miles.    The 
expert,  looking  back  upon  nearly  a  hundred  years 
of  railroad  history,  may  now  satisfactorily  explam 
this  curious  circumstance;  but  it  is  not  surprismg 
that  the  farmer  of  the  early  seventies,  overbur- 
dened  with  debt  and  burning  his  own  corn  for  fuel 
because  he  could  not  pay  the  freight  exacted  for 
hauling  it  to  market,  saw  in  the  system  only  an 
attempt  to  plunder.    Yet  even  the  shippers  at  ter- 
minal points  had  their  grievances,  for  the  compe- 
tition at  these  points  became  so  savage  and  so  ru- 
inous that  the  roads  soon  entered  into  agreements 
fixing  rates  or  formed  "pools."    In  accordance 
with  this  latter  arrangement,  all  business  was  put 
into  a  common  pot,  as  the  natural  property  of  the 
roads  constituting  the  pool;  it  was  then  allotted  to 
different  lines  according  to  a  percentage  agreement, 
and  the  profits   were  divided  accordingly.    As 
the  purpose  of  rate  agreements  and  pools  was  to 
stop  competition  and  to  keep  up  prices,  it  is  hard- 
ly surprising  that  they  were  not  popular  m  the 


THE  AMERICAN  RAILROAD  PROBLEM  219 

communities  which  they  affected.  The  circum- 
stance that,  after  solemnly  entering  into  pools,  the 
allied  roads  would  frequently'  violate  their  agree- 
ments and  cut  rates  surreptitiously  merely  added 
to  the  general  confusion. 

The  early  seventies  were  not  a  time  of  great 
prosperity  in  the  newly  opened  West,  and  the  farm- 
ers, looking  about  fo."  the  source  of  their  dis- 
comforts, not  unnaturally  fixed  upon  the  railroads. 
Their  period  of  discontent  coincided  with  what  will 
always  be  known  in  American  history  as  *'the 
Granger  movement."  In  its  origin  this  organiza- 
tion apparently  had  no  relation  to  the  dissatis- 
faction which  its  leao-  s  afterward  so  :uccessfully 
capitalized.  Its  founder,  Oliver  Hudson  Kelley,  at 
the  time  when  he  started  the  fraternity  was  not 
even  a  farmer  but  a  clei  L  in  the  Agricultural  Bureau 
at  Washington.  Afterward,  when  the  Grangers 
had  become  an  agrarian  force  to  be  feared,  if  not 
respected,  it  was  a  popular  jest  to  refer  to  the  origi- 
nators of  this  great  farmers'  organization  as  "one 
fruit  grower  and  six  government  clerks."  Kelley*s 
first  conception  seems  to  have  been  to  organize  the 
farmers  of  the  nation  into  a  kind  of  Masonic  order. 
The  Patrons  of  Husbandry,  which  was  the  oj£ciaI 

ecret  organization,  with 


was 


220  THE  RAILROAD  BUILDERS 

signs,  grips,  passwords,  oaths,  degrees,  and  all  the 
other  in      ossive  paraphernalia  of  its  prototype. 
Its  officers   were   called   Master,   Lecturer,   and 
Treasurer  and  Secretary;  its  subordinate  degrees 
for  men  were  Laborer,  Cultivator,  Harvester,  and 
Husbandman;  for  women  —  and  women  took  an 
important  part  in  the  movement  —  were  Maid, 
Shepherdess,  Gleaner,  and  Matron,  while  there 
were  higher  orders  for  those  especially  ambitious 
and  influential,  such  as  Pomona  (Hope),  Demeter 
(Faith),  and  Flora   (Charity).     Certainly  these 
titles  suggest  peace  and  quiet  rather  than  discon- 
tent and  political  agitation;  and,  indeed,  the  or- 
ganization, as  evolved  in  Kelley's  brain,  aimed  at 
nothing  more  startling  than  the  social,  intellec- 
tual, and  economic  improvement  of  the  agricultural 
classes.    Its  constitution  especially  excluded  poli- 
tics and  religion  as  not  being  appropriate  fields  of 
activity.    It  did  propose  certain  forms  of  busi- 
ness cooperation,  such  as  the  common  purchase 
of  supplies,  the  marketing  of  products,  perhaps  the 
manufacture  of  agricultural  implements;  but  its 
main  idea  was  to  contribute  to  the  social  well-being 
of  the  farmers  and  their  families  by  frequent  meet- 
ings and  entertainments,  and  to  improve  farming 
methods  by  collecting  agricultural  statistics  and 


THE  AMERICAN  RAILROAD  PROBLEM  221 

by  spreading  the  earliest  applications  of  science 
to  agriculture.  The  idea  that  the  "Grange,"  as 
the  organization  was  generally  known,  would  ulti- 
mately devote  the  larger  part  of  its  energies  to 
fighting  the  railroads  apparently  never  entered  the 
minds  of  its  founders. 

Had  it  not  been  for  the  increasing  agricultural 
discontent  against  railroads  and  corporations  in 
general,  the  Patrons  of  Husbandry  would  probably 
have  died  a  painless  death.  But  in  the  early  seven- 
ties this  hostility  broke  out  in  the  form  of  minority 
political  parties,  the  principal  plank  in  whose  plat- 
form was  the  regulation  of  the  railroads.  Farmers' 
tickets,  anti-monopoly  parties,  and  anti-railroad 
candidates  began  to  appear  in  county  and  even 
state  elections,  sometimes  achieving  such  success 
as  to  frighten  the  leaders  of  the  established  organi- 
zations. The  chief  aim  of  the  discontented  was 
"protection  from  the  intolerable  wrongs  now  in- 
flicted on  us  by  the  railroads."  "Railroad  steals, " 
"railroad  pirates,"  "Wall  Street  stock-jobbers," 
and  like  phrases  supplied  the  favorite  slogans  of  the 
spirited  rural  campaigns.  These  parties,  though 
much  ridiculed  by  the  metropolitan  press,  started 
a  political  agitation  which  spread  with  increasing 
force  in  the  next  forty  years  and  in  recent  tin)es 


^Zii  THE  RAILROAD  BUILDERS 

eventually  gained  the  ascendency  in  both  the  old 
political  parties. 

The  panic  of  1873  and  the  unusually  hard  times 
that  followed  added  fuel  to  the  flame.   It  was  about 
this  time  that  the  Patrons  of  Husbandry  gave 
evidences  of  a  new  vitality,  chiefly  manifested  in  a 
rapidly  increasing  membership.    On  May  19, 1873, 
there  were  33C0  Granges  in  the  United  States,  while 
nineteen  months  later,  on  January  1,  1875,  there 
were  21,697,  with  a  total  membership  of  over  seven 
hundred  thousand.     In  the  Eastern  States  the 
movement  had  made  little  progress;  in  the  South 
it  had  beconie  somewhat  more  popular;  in  such 
States  as  ^Missouri,  Iowa,  Kansas,  Nebraska,  Mon- 
tana, Idaho,  and  Oregon,  it  had  developed  into 
almost  a  dominating  influence.    It  is  not  difficult 
to  explain  this  sudden  and  astonishing  growth :  the 
farmers  in  the  great  grain  States  seized  upon  this 
organization   as  the    most   available  agency  for 
remedying  their  wrongs  and  rescuing  them  from 
poverty.    In  their  minds  the  National  (irange  now 
became  the  one  means  through  which  they  could 
obtain  that  which  they  most  desired  —  cheaper 
transportation.   Not  only  did  its  membership  show 
great  increase,  but  money  from  dues  now  filled  the 
treasury  to  overflowing.     At  the  same  time  the 


THE  AMERICAN  RAILROAD  PROBLEM  223 

organs  of  the  capitalist  press  began  to  attack  the 
Grange  violently,  while  the  politicians  in  the  sec- 
tions where  it  was  strongest  sedulously  cultivated 
it.    But  the  leaders  of  the  movement  never  made 
the  fatal  mistake  of  converting  their  organization 
into  a  political  partv.    It  held  no  political  conven- 
tions, named  no  candidates  for  oflBce,  and  even 
officially  warned  its  members  against  discussing 
political  questions  at  their  meetings.    Yet,  accord- 
ing to  a  statement  in  the  New   York   Tribune, 
"within  a  few  weeks  the  Grange  menaced  the  po- 
litical equilibrium  of  the  most  steadfast  States.    It 
had  upset  the  calculations  of  veteran  campaigners, 
and  put  the  professional  office-seekers  to  more 
embarrassment  than  even  the  Back  Pay."     The 
Grangers  fixed  their  eyes,  not  upon  men  or  upon 
parties,  but  upon  measures.    They  developed  the 
habit  of  questioning  candidates  for  office  concern- 
ing their  attitude  on  pending  legislation  and  of 
publishing  their  replies.    Another  favorite  device 
was  to  hold  Granger  conventions  in  state  capitals 
while  the  legislature  was  sitting  and  thus  to  bring 
personal  pressure  in  the  interest  of  their  favorite 
bills.     This  method  of  suasion  is  an  extremely 
potent  political  force  and  explains  the  fact  that, 
in  certain  States  where  the  Granges  were  most 


224  THE  RAILROAD  BUILDERS 

powerful,  they  had  practically  everything  their 
own  way  in  railroad  legislation. 

The  measures  which  they  thus  forced  upon  the 
statute  books  and  v  hich  represented  the  first  com- 
prehensive  attempt   to   regulate   railroads  have 
always   been   known    as    the   "Granger  Laws." 
These  differed  in  severity  in  different  States,  but 
in  the  main  their  outlines  were  the  same.    Prac- 
tically all  the  Granger  legislatures  prohibited  free 
passes  to  members  of  the  legislatures  and  to  public 
oflBcials.    A  law  fixing  the  rate  of  passenger  fares  — 
the  maximum  ranging  all  the  way  from  two  and  one- 
half  to  five  cents  a  mile  —  was  a  regular  feature 
of  the  Granger  programme.    Attempts  were  made 
to  end  the  "long  and  short  haul"  abuse  by  passing 
acts  which  prohibited  any  road  from  charging  more 
for  the  short  distance  than  for  the  long  one.    More 
drastic  still  were  the  laws  passed  by  Iowa  in  1874 
and  the  famous  Potter  bill  passed  by  Wisconsin  in 
the  same  year.     Both  these  measures,  bcbides  fix- 
ing passenger  fares,  wrote  in  the  law  itself  detailed 
schedules  of  freight  rates.   The  Iowa  act  included  a 
provision  establishing  a  fund  of  $10,000  which  was 
to  be  used  by  private  individuals  to  pay  the  ex- 
penses of  suits  for  damages  under  the  act,  and  this 
same  act  made  all  railroad  oflBcials  and  employees 


THE  AMERICAN  RAILROAD  PROBLEM  225 

who  were  convicted  of  violations  subject  to  fine 
and  imprisonment.  The  Potter  act  was  even  more 
severe.  It  not  only  fixed  maximum  freight  rates, 
but  it  established  classifications  of  its  own.  The 
railroads  asserted  that  the  framers  of  this  law  had 
simply  taken  the  lowest  rates  in  force  everywhere 
and  reduced  them  twenty-five  per  cent.  But  Iowa 
and  Wisconsin  and  practically  all  the  States  that 
passed  the  Granger  laws  also  established  railroad 
commissions.  For  the  most  part  these  commis- 
sions followed  the  model  of  that  established  by 
Massachusetts  in  1369,  a  body  which  had  little 
mandatory  authority  to  fix  rates  or  determine 
service,  but  which  depended  upon  persuasion,  ar- 
bitration, and,  above  all,  publicity,  to  accomplish 
the  desired  ends.  The  Massachusetts  commission, 
largely  owing  to  the  high  character  and  ability  of 
its  membership  —  Charles  Francis  Adams  serving 
as  chairman  for  many  years  —  had  worked  admir- 
ably. In  the  most  part  these  new  Western  com- 
missions were  limited  in  their  activities  to  regulat- 
ing accounting,  obtaining  detailed  reports,  collect- 
ing statistics,  and  enforcing  the  new  railroad  laws. 
These  measures,  following  one  another  in  rapid 
succession,  produced  a  national,  even  an  inter- 
national sensation.     The  raihoad  managements 


IM 


246  THE  RAILROAD  BUILDERS 

stood  aghast  at  what  they  regarded  as  demagogic 
invasions  of  their  rights,  and  the  more  conservative 
elements  of  the  American  public  looked  upon  them 
as  a  violent  attack  upon  property.    Up  to  this  time 
there  had  been  little  general  understanding  of  the 
nature  of  railroad  property.    In  the  minds  of  most 
people  a  railroad  was  a  business,  precisely  like  any 
other  business,  and  the  modem  notion  that  it  was 
"affected  with  a  public  interest"  and  that  the 
public  was  therefore  necessarily  a  partner  in  the 
railroad  business  had  made  practically  no  headway. 
"  Can't  I  do  what  I  want  with  my  own?  "  Commo- 
dore Vanderbilt  had  exclaimed,  asserting  his  ex- 
clusive right  to  control  the  operations  of  the  New 
York  Central  system;  and  that  question  fairly  well 
represented  the  popular  attitude.    That  the  rail- 
road exercised  certain  rights  of  sovereignty,  such 
as  that  of  eminent  domain,  that  it  actually  used  in 
its  operations  property  belonging  to  the  State,  and 
that  these  facts  in  themselves  gave  the  State  the 
right  to  supervise  its  management,  and  even,  if 
necessity  arose,  to  control  it  —  all  this  may  have 
been  recognized  as  an  abstruse  legal  proposition, 
but  it  occupied  no  practical  place  in  the  business 
consciousness  of  that  time.     Naturally  the  first 
step  of  the  railroads  was  therefore  to  contest  the 


THE  AMERICAN  RAILROAD  PROBLEM  2«7 
constitutionality  of  the  laws,  and  while  these  suits 
were  pending  they  resorted  to  various  expedients 
to  evade  these  laws  or  to  mitigate  their  severity. 
A  ti    ch  of  liveliness  and  humor  was  added  to  the 
situation  by  the  thousands  of  legal  fare  cases  that 
filled  the  courts,  for  farmers  used  to  indulge  in  one 
of  their  favorite  agricultural  sports  —  getting  on 
trains  and  tendering  the  legal  two  and  a  half  cents  a 
mile  fare,  a  situation  that  usually  led  to  ejectment 
for  nonpayment  and  then  to  a  suit  for  damages. 
The  railroads  easily  met  the  laws  forbidding  lighter 
charges  for  long  than  for  short  hauls  by  increasing 
the  rates  for  the  longer  distances,  and  the  laws 
fixing  maximum  rates  within  the  State  by  increas- 
ing the  rates  outside  the  State.    When  the  courts 
decided  the  cases  against  the  railroads,  as  in  most 
cases  they  did,  these  corporations  set  about  to  se- 
cure the  repeal  of  the  laws.    They  started  cam- 
paigns of  education,  frequently  through  magazine 
or  newspaper  articles  pointing  out  the  injustice 
of  the  Granger  laws  and  insisting  that  they  were 
working  great  public  damage.    It  is  a  fact  that 
a  decrease  in  railroad  construction  followed  the 
Granger  demonstration,  and  the  friends  of  the  rail- 
roads insisted  that  timid  capital  hesitated  to  em- 
bark in  an  enterprise  that  was  constantly  subject 


^OH  THE  RAILROAD  BUILDERS 

to  leKislative  attack.  These  campaigns  succeeded 
much  better  than  the  more  violent  opposition  to 
which  the  railroads  had  first  resorted.  The  Western 
States  in  the  majority  of  cases  repealed  their  most 
drastic  legislation.  Nearly  all  the  laws  fixing 
maximum  rates  disappeared  from  the  books,  and 
even  Iowa  and  Wisconsin  substituted  for  these 
measures  supervisory  and  advisory  commissions 
after  the  Massachusetts  model. 

While  the  Granger  movement  thus  failed  effec- 
tively to  curb  the  railroads,  it  succeeded  in  arous- 
ing great  popular  interest  in  the  railroad  problem 
and  in  placing  before  the  public  several  of  the  most 
important  details  of  that  problem.    Not  the  least 
of  its  achievements  were  the  decisions  which  it 
obtained  from  the  Supreme  Court  of  the  United 
States.     The  Granger  cases  are  among  the  most 
epoch-making  in  American  history,  and  they  fixed 
for  all  time  the  principles  of  American  policy  in 
dealing  with   the  railroad   question.     They  are 
particularly  worthy  of  study  by  those  who  have 
regarded  the  Supreme  Court  as  the  bulwark  of 
social  injustice  and  as  a  body  which  can  always 
be  relied  upon  to  protect  the  rights  of  property 
against  the  interests  of  the  masses.    In  its  raih-oad 
decisions  this  chargehardly  holds;  for  these  Granger 


THE  AMERICAN  RAILROAD  PROBLEM  2«9 

cases  sustain  practically  all  the  legal  contentions 
made  by  the  Granger  legislatures. '  The  cases  fixed 
for  all  time  the  point  that  a  State,  acting  under 
the  police  power,  may  regulate  the  charges  of  a 
railroad  even  to  the  extent  of  fixmg  maximum 
rates.  They  even  went  so  far  as  to  hold  that  the 
right  to  fix  rates  is  not  subject  to  any  restraint 
by  the  court  on  the  ground  of  unreasonableness,  a 
principle  which  the  Supreme  Court  has  reversed 
in  more  recent  times.  The  courts  also  held  that  a 
State,  at  least  until  Congress  acted,  could  regu- 
late interstate  commerce,  but  this  decision  also  has 
since  then  been  reversed.  These  subsequent  rever- 
sals of  decisions  which  were  exceedingly  popular  at 
the  time,  however,  not  only  constituted  sound  law 
but  promoted  the  public  interest,  for  they  estab- 
lished that  body  of  law  which  has  made  possible 
the  present  more  comprehensive  system  of  Federal 
regulation  of  railroads. 

Meanwhile  the  demand  for  regulation  was  gain- 
ing strength  in  the  Eastern  States,  but  for  somewhat 
different  reasons.  The  farmers  of  New  England, 
New  York,  and  the  Eastern  region  in  general  had 

'  The  cases  of  particular  interest  were:  Munn  va.  Illinois,  94  U.  S. 
114;  Peik  va.  Chicago  and  Northwestern  Railway  Company,  94  U.  S. 
164;  and  Chicago,  Burlington  and  Quincy  Railway  Company  ra. 
Cutts.  04  U.  S.  155. 


iSO  IHB  RAILROAD  BUILDERS 

not  particularly  sympathized  with  the  Granger 
legislation;  they  already  had  great  diflSculty  in 
competing  with  the  large  Western  farms,  and  a  re- 
duction in  rates  to  the  seaboard  would  have  made 
their  position  even  less  endurable.    This  attitude 
was  unquestionably  selfish  but  entirely  compre- 
hensible.   The  agitation  for  raih-oad  reform  in  the 
East  came  chiefly  from  the  manufacturing  and 
commercial  classes.    Here  the  main  burden  of  the 
complaint  was  the  railroad  rebate.     This  was  a 
method  of  giving  lower  rates  to  large  shippers  than 
to  small  —  charging  the  favored  shipper  the  pub- 
lished rate  and  then,  at  stated  periods,  surrepti- 
tiously returning  part  of  the  payment.    This  was 
perhaps  the  most  vicious  abuse  of  which  the  rail- 
roads have  ever  been  guilty.    That  the  common 
law  forbade  the  practice  and  that  it  likewise  vio- 
lated the  implied  contract  upon  which  the  railroad 
obtained  its  franchise  was  hardly  open  to  dispute; 
yet  up  to  1887  no  specific  law  in  this  country  pro- 
hibited the  practice.    For  many  years  the  rebate 
hung  over  the  American  business  world,  a  thing 
whose  existence  was  half  admitted,  half  denied,  a 
kind  of  ghostly  economic  terror  that  seemed  per- 
sistently to  drive  the  small  corporation  to  bank- 
ruptcy and  the  large  corporation  to  donJnatiug 


THE  AMERICAN  RAILROAD  PROBLEM  2S1 

influence.     The  Standard  Oil  Compa  y  was  the 
"monster"  that  was  believed  especially  to  thrive 
upon  this  kind  of  sustenance,  though  this  was  by 
no  means  the  only  industry  that  maintained  such 
secret  relatioi^s  with  the  railroads;  the  Carnegie 
Steel  Corporation,  for  example,  accepted  rebates 
almost  as  persistently.    It  was  not  until  1879,  when 
the  Hepburn  Committee  in  New  York  State  had 
its  hearings,  that  all  the  facts  concerning  the  rebate 
were  exposed  oflScially  to  public  view.    The  con- 
tracts of  the  Standard  Oil  Company  with  the  rail- 
roads were  placed  upon  the  records  and  these 
showed  that  all  the  worst  suspicions  regarding  this 
practice  were  justified.    This  disclosure  made  the 
railroad  rebate  one  of  the  most  familiar  facts  in 
American  industrial  life;  and  in  consequence  a  de- 
mand arose  for  Federal  legislation  that  would  defi- 
nitely make  the  practi  e  a  crime  and  also  for  some 
kind  of  Federal  supervision  to  do  eflfectively  the 
work  which  the  state  commissions  had  failed  to  do. 
By  this  time  it  was  c'ear  enough  that  the  only 
hope  of  adequate  regulatir  a  lay  with  the  Federal 
Government.     Congressman  Reagan,   of  Texas, 
had  for  years  been  pushing  a  bill  to  regulate  in- 
terstate  commerce  and  to  prohibit  unjust  dis- 
criminations by  common  carriers;  other  measures 


232  THE  RAILROAD  BUILDERS 

periodically  made  their  appearance  in  the  Senate; 
but  the  Houses  had  been  unable  to  agree  and 
nothing  had  been  done. 

Two  facts  presently  gave  great  impetus  to  the 
movement;  in  1886  the  United  States  Supreme 
Court,  reversing  its  previous  decision,  decided  that 
no  State  could  fix  rates  for  railroad  lines  outside  its 
own  borders,  in  other  words,  that  interstate  rates 
were  exclusively  within  the  jurisdiction  of  the 
Federal  authority';  and  a  Senate  committee,  under 
ihe  chairmanship  of  Shelby  B.  Cullom,  conducted 
an  investigation  of  railroad  conditions  which  made 
dear  the  need  of  immediate  reform.  As  a  conse- 
quence. Congress  passed  the  Interstate  Commerce 
Act,  which  received  President  Cleveland's  signa- 
ture on  February  4,  1887.  This  measure  specifi- 
cally made  illegal  rebates,  pools,  higher  charges  for 
short  than  for  long  hauls  (when  the  hauls  in  ques- 
tion were  upon  the  same  road) ;  it  required  railroads 
to  file  their  tariffs,  and  it  established  a  commission 
of  five  members,  who  had  powers  of  investigation, 
including  the  right  to  make  the  companies  produce 
their  books.  This  commission  received  power  to 
establish  systems  of  accounting  and  the  like,  but  it 

•  Wabash,  St.  Louis  and  Pacific  Railway  Company  v».  Illinoia  11* 
U.  S.  557. 


THE  AMERICAN  RAILROAD  PROBLEM  233 

had  no  prerogative  to  fix  rates.  Inadequate  as  this 
measure  aeemed  to  the  radical  element,  it  was 
generally  hailed  as  marking  the  beginning  of  an  era 
in  the  Federal  control  not  only  of  railroads  but  of 
other  corporations,  and  this  impression  was  in- 
creased by  the  high  character  of  the  men  whom 
President  Cleveland  appointed  to  the  first  board. 

The  Interstate  Commerce  Commission  lasted 
essentially  in  this  form  for  nearly  twenty  years. 
On  the  whole  it  was  a  failure.  Such  was  the  judg- 
ment passed  by  Justice  Harlan  of  the  United 
States  Supreme  Court  when  he  remarked  in  one  of 
his  decisions  that  the  commission  was  "a  useless 
body  for  all  practical  purposes";  and  such,  indeed, 
was  the  judgment  of  the  commission  itself,  for  in  its 
report  of  1898  it  declared  that  the  attempt  at 
Federal  regulation  had  failed.  The  chief  reasons 
for  this  failure,  the  commission  said,  were  the  con- 
tinued existence  of  secret  rates  and  the  fact  that 
published  tariffs  were  not  observed. '  The  manag- 
ers of  the  great  American  railroad  systems  would 
not  yet  admit  that  the  fixing  of  railroad  rates  was 
the  concern  of  any  one  but  themselves,  and  they 

<  But  it  should  be  added  that  the  effectiveness  of  the  commissioD 
as  an  administrative  and  regulating  body  was  diminished  by  decisions 
of  the  court",  notably  the  decision  of  the  Supreme  Court  in  the 
maximum  rate  case.    See  160  U.  S.  479- 


234  THE  RAILROAD  BUILDERS 

still  regarded  railroad  management  as  essentially  a 
private  business.  If  they  could  obtain  large  ship- 
ments by  granting  special  rates,  even  though  they 
had  to  do  it  by  such  imderhanded  ways  as  granting 
rebates,  they  believed  that  they  were  entirely  justi- 
fied in  doing  so.  Thus  rebates  flourished  £:lmost  as 
much  as  ever,  passes  were  still  liberally  bestowed, 
and  pools  were  still  formed,  though  they  sometimes 
took  the  shape  of  "gentlemen's  agreements." 

In  1906,  when  President  Roosevelt  became  in- 
tensely active  in  the  railroad  problem,  conditions 
were  fairly  demoralized.  Attempts  to  enforce  the 
anti-pooling  clause  had  led  raih*oads  to  purchase 
competing  lines,  and  when  the  United  States  Su- 
preme Court  pronounced  this  illegal,  the  situation 
became  chaotic.  The  evils  of  over-capitalization 
also  became  an  issue  of  the  times.  The  Interstate 
Commerce  Commission  had  become  almost  mori- 
bund, and  there  was  a  general  sentiment  that  the 
trouble  arose  from  the  fact  that  the  commission 
had  no  power  to  fix  rates  and  that  the  solution  of 
the  railroad  problem  would  come  only  when  such 
power  was  vested  in  it. '   The  Interstate  Commerce 

'  The  Elkins  Act  of  190S  had,  it  is  true,  increased  the  effectivencM 
of  the  commissiou  in  dealing  with  discriminations.  b>it  it  had  not 
solved  the  problem  of  securing  reasonable  rates. 


THE  AMERICAN  RAILROAD  PROBLEM  235 

Act  which  became  a  law  on  June  29, 1906,  was  the 
outcome  of  one  of  the  greatest  battles  of  President 
Roosevelt's  political  life.  The  act  increased  the 
membership  of  the  commission  from  five  to  seven 
members,  placed  under  its  jurisdiction  not  only 
railroads  but  pipe  lines,  express  companies,  and 
sleeping-car  companies,  added  to  the  other  fa- 
miliar restrictions  a  "commodities  clause,"  which 
prohibited  any  raiboad  from  transporting  a  prod- 
uct which  it  had  produced  or  mined,  "except  such 
articles  or  commodities  as  may  be  necessary  and 
intended  for  its  use  in  the  conduct  of  its  business  as 
a  common  carrier  "  —  this  clause  was  intended  to 
end  the  railroad  monopoly  of  the  coal  mines  — 
and  made  the  failure  to  observe  published  tariffs  a 
crime  punishable  with  imprisonment.  The  amended 
law  did  not  give  the  commission  the  right  to  fix 
rates  in  the  first  instance  but  did  empower  it,  on 
complaint,  to  investigate  charges  and  on  the  basis 
of  this  investigation  to  determine  just  maximum 
rates,  regulations,  and  practices,  though  carriers 
were  given  the  right  of  appeal  to  the  courts. 

Thus,  in  essence,  the  public  had  obtained  the 
reform  which  it  had  been  demanding  for  years. 
The  reorganized  commission  did  not  hesitate  to 
exercise  its  new  powers.    It  soon  began  actually 


236  THE  RAILROAD  BUILDERS 

fixing  rates,  and  from  being  a  half-alive  despised 
institution  it  rapidly  developed  into  one  of  the 
most  powerful  agencies  of  administration.  In  the 
succeeding  ten  years  its  powers  were  still  further 
enlarged  by  acts  of  Congress  and  the  privilege  of 
fixing  charges  practically  passed  out  of  the  hands 
of  the  railroads  into  the  control  of  the  Interstate 
Commerce  Commission.  The  railroads,  that  is, 
practically  lost  the  power  to  regulate  their  own 
income.  Meanwhile,  the  progressive  movement 
in  American  politics  had  led  to  the  creation  of 
commissions  in  most  of  the  States,  with  similar 
authority  over  rate  making  within  the  States,  be- 
sides exercising  numerous  other  powers  over  service 
and  capitalization.  Many  railroads  fell  upon  evil 
days  and  receiverships  again  became  common. 
Naturally  the  railroad  managers  attributed  these 
calamities  to  the  fact  that  they  were  so  constantly 
being  regulated;  but  they  probably  pushed  this 
claim  too  far,  for  the  causes  of  their  troubles  were 
more  complex. 

In  1916,  in  the  heat  of  a  political  campaign,  the 
Federal  Government  took  a  step  which  introduced 
a  new  principle  into  railroad  management  and 
made  the  roads  practically  helpless.  The  four 
brotherhoods  of  railroad  operatives  were  making 


THE  AMERICAN  RAILROAD  PROBLEM  237 

demands  for  a  so-called  eight-hour  day,  and  threat- 
ened a  general  strike  that  would  paralyze  all  busi- 
ness and  industry  and  throw  the  whole  life  of  the 
nation  into  chaos.  Properly  to  appreciate  the 
consequences  of  this  event,  it  is  necessary  to  keep 
in  mind  the  fact  that  the  plea  for  an  "eight-hour 
day  "  was  spurious.  An  eight-hour  day  cannot  be 
rigidly  enforced  on  railroads;  the  workmen  well 
knew  this,  and  indeed  they  did  not  really  demand 
such  working  hours.  What  they  asked  for  was  a 
full  day's  pay  for  eight  hours  and  "time  and  a 
half"  pay  for  all  in  excess  of  that  amount;  that  is, 
they  demanded  an  increase  in  wages.  President 
Wilson,  having  failed  in  his  attempt  to  settle  the 
difficulty  by  arbitration,  compelled  a  Democra- 
tic Congress  over  which  his  sway  was  absolute  to 
pass  a  law  —  sponsored  by  Chairman  Adamson  of 
the  House  Committee  on  Interstate  Commerce  — 
which  granted  practically  what  the  unions  de- 
manded. In  passing  this  law,  Congress  asserted 
an  entirely  new  power  which  no  one  had  ever  sus- 
pected that  it  possessed  —  that  of  fixing  the  wages 
which  should  be  paid  by  common  carriers  and 
possibly  by  other  corporations  engaged  in  inter- 
state commerce.  The  railroads  immediately  took 
the  case  to  the  United  States  Supreme  Court,  which 


438  THE  RAILROAD  BUILDERS 

promptly  sustained  the  law.  This  decision,  un- 
questionably the  most  radical  in  the  history  of  that 
body,  declared  virtually  that  Congress  could  pass 
any  law  regulating  railroads  which  the  public 
interest  demanded. 

And  thus,  after  fifty  years  of  almost  incessant 
struggle  with  the  public,  was  the  mighty  railroad 
monster  humbled.  It  had  lost  power  to  regulate 
the  two  items  which  represent  the  existence  of  a 
business  —  its  income  and  its  outgo.  The  Inter- 
state Commerce  Commission  was  now  fixing  rail- 
road rates,  and  Congress  was  fixing  the  amounts 
of  railroad  wages.  It  remained  for  the  Great  Wa^ 
to  precipitate  the  only  logical  outcome  of  this  situa- 
tion —  government  control.  The  steadily  increas- 
ing responsibilities  of  war  soon  told  heavily  upon  all 
lines  until,  in  the  latter  part  of  1917,  the  whole  rail- 
road system  of  the  United  States  had  all  but  broken 
down .  The  unions  were  pressing  demands  for  wage 
increases  that  would  have  added  a  billion  dollars 
a  year  to  their  annual  budgets.  The  fact  that  so 
large  a  part  of  the  output  of  American  locomotive 
works  was  being  shipped  to  the  Allies  made  it  diffi- 
cult for  the  American  lines  to  maintain  their  own 
supply.  Nearly  all  coastwise  ships  and  tugs  were 
utilized  for  war  work,  a  large  part  of  them  had  been 


THE  AMERICAN  RAILROAD  PROBLEM  2S9 

sent  to  the  other  side,  and  this  put  an  addition- 
al strain  upon  the  railroads.  The  movement  of 
troops,  the  heavy  building  operations  in  canton- 
ments and  shipbuilding  plants,  the  manufacture 
and  transportation  of  munitions,  all  put  an  unprec- 
edented pressure  upon  them.  Everywhere  there 
was  great  shortage  of  cars,  equipment,  and  mate- 
rials .  Possibly  the  railroads  might  have  risen  to  the 
occasion  except  for  the  fact  that  the  enormous 
increase  in  the  cost  of  labor  and  supplies  made  de- 
mands upon  their  treasuries  which  they  could  not 
meet.  They  repeatedly  asked  the  Interstate  Com- 
merce Commission  for  an  increase  in  rates,  but  this 
request  was  repeatedly  refused.  The  roads  were 
therefore  helpless,  and  their  operations  became  so 
congested  as  to  create  a  positive  military  danger. 
Under  these  circumstances  there  was  profound 
relief  when  President  Wilson  took  over  the  roads 
and  placed  them  under  government  control,  with 
William  Gibbs  McAdoo,  Secretary  of  the  Treasury, 
in  active  charge. 

McAdoo  immediately  took  the  step  which  the 
Administration,  while  the  railroads  were  under 
private  control,  had  steadily  refused  to  sanction, 
and  now  increased  the  rates.  These  increases  were 
J80  great  that  they  made  the  public  fairly  gasp,  but. 


240 


THE  RAILROAD  BUILDERS 


under  the  impulse  of  patriotism,  there  was  a  good- 
natured  acquiescence.  McAdoo  also  increased 
wages  by  hundreds  of  millions  of  dollars.  His  ad- 
ministration on  the  whole  was  an  able  one.  He 
ignored  for  the  moment  the  prevailing  organiza- 
tion and  managed  the  roads  as  though  they  con- 
stituted a  single  system.  He  instituted  economies 
by  concentrating  ticket  offices,  establishing  uni- 
form freight  classifications,  making  common  the 
use  of  terminals  and  repair  shops,  abolishing  cir- 
cuitous routes,  standardizing  equipment,  increas- 
ing the  loads  of  cars  and  by  introducing  a  multi- 
tude of  other  changes.  All  these  reforms  greatly 
increased  the  usefulness  of  the  roads,  which  now 
became  an  important  element  in  winning  the  war. 
Properly  regarded,  the  American  railroads  became 
as  important  a  link  in  the  chain  of  communications 
reaching  France  as  the  British  fleet  itself.  It  is  not 
too  much  to  say  that  the  fate  of  the  world  in  the 
critical  year  1918  hung  upon  this  tremendous 
railroad  system  which  the  enterprise  and  genius 
of  Americans  had  built  up  in  three-quarters  of  a 
century.  In  February,  1918,  Great  Britain,  France, 
and  Italy  made  oflScial  representations  to  the 
American  Government,  declaring  that  unless  food 
deliveries  could  be  made  as  they  had  been  prom* 


THE  AMERICAN  RAILROAD  PROBLEM  241 

ised  by  Hoover's  food  administration,  Germany 
would  win  the  war.  McAdoo  acted  immediately 
upon  this  information.  He  gathered  all  available 
cars,  taking  them  away  from  their  ordinary  routes, 
and  rushed  them  from  all  parts  of  the  country  to 
the  great  grain  producing  States.  All  other  kinds 
of  shipments  were  discontinued;  officials  and  em- 
ployees from  the  highest  to  the  lowest  worked  day 
and  night;  and  presently  the  huge  supplies  of  the 
indispensable  food  started  towards  the  Atlantic 
coast.  So  successful  was  this  operation  that,  on 
the  12th  of  March,  the  supplies  so  exceeded  the 
shipping  capacity  of  the  Allies  that  6318  carloads 
of  food  stood  at  the  great  North  Atlantic  ports 
awaiting  transportation.  This  dramatic  movement 
of  American  food  supplies  was  an  important  item 
in  winning  the  war  and  fairly  illustrated  the  great 
part  which  the  American  railroads  played  in  turning 
the  tide  of  battle  from  defeat  to  victory. 


".ft 


BIBLIOGRAPHICAL  NOTE 


General  literature  on  the  history  of  American  rail- 
roads is  surprisingly  scarce.  While  numerous  volumes 
have  been  written  in  recent  years  on  special  phases  of 
the  railroad  question,  few  histories  of  any  real  value  are 
available.  Probably  the  best  outline  history  of  Ameri- 
can railroad  development  as  a  /hole  is  still  Arthur  T. 
Hadley's  Railroad  Transportation,  its  History  and  its 
Laws  (1885),  but  this  necessarily  covers  only  the  earlier 
periods  of  railroad  growth  and  its  discussions  are  limited 
to  the  problems  which  confronted  the  carriers  many 
years  ago.  An  extremely  valuable  book  (now  out  of 
print)  giving  a  very  complete  picture  of  railroad  build- 
ing and  expansion  in  the  pre-Civil  War  period  is  The 
Book  of  the  Great  RaUtoay  Celebraiion  of  1867 1  by  William 
Prescott  Smith.  This  is  primarily  a  description  of  the 
opening  of  the  Ohio  and  Mississippi  Railway,  which 
connected  the  Mississippi  Valley  for  the  first  time  with 
the  Eastern  seaboard.  A  volume  of  real  value,  but 
somewhat  technical,  giving  a  complete  and  accurate 
view  of  the  reorganization  period  of  the  great  railroad 
systems,  from  1885  to  1900,  is  Railroad  Reorganiza- 
tionj  by  Stewart  Daggett  (1910).  This  book  contains 
outline  sketches  of  the  histories  of  nearly  all  of  the  large 
systems,  as  well  as  very  accurate  details  of  the  financial 
reorganizations  of  «11  of  the  defaulted  properties. 

MS 


244 


BIBLIOGRAPHICAL  NOTE 


IiaC  most  comprehensive  history  of  any  American 
railroad  system  is  The  Story  of  Erie,  by  H.  S.  Mott 
(1900),  but  even  this  is  partially  unreliable  and  much 
of  it  is  compiled  from  unofficial  sources.  On  the  finan- 
cial history  of  the  Erie  Railroad,  the  really  valuable 
authority  is  Charles  Francis  Adams  in  his  Chapters  of 
Erie  (1871).  This  book  furnishes  a  full  and  accurate 
account  of  the  regime  of  Daniel  Drew,  Jay  Gould,  James 
Fisk,  Jr.,  and  the  famous  "  Erie  ring, "  including  "  Boss  '* 
Tweed,  and  also  throws  side  lights  on  the  character  and 
career  of  Commodore  Vanderbilt.  Among  other  im- 
portant histories  of  particular  railroad  systems  may  be 
mentioned  The  Union  Pacific  Railway,  by  John  P.  Davis 
(1894)  and  History  of  the  Northern  Pacific  Railroad,  by 
Eugene  V.  Smalley  (1883);  but  neither  of  these  volumes 
covers  the  recent  and  more  interesting  periods  in  the 
development  of  these  properties.  To  get  a  complete 
and  satisfactory  view  of  the  later  development  f  the 
Northern  Pacific  system,  one  must  turn  to  modern 
biographical  works,  such  as  the  Life  of  Jay  Cooke,  by 
E.  P.  Oberholtzer  (1910),  the  Memoirs  of  Henry  ViUard 
(1909),  and  the  Life  of  James  J.  HiU,  by  Joseph  Gilpin 
Pyle  (1916),  which  also  recounts  at  length  the  rise  and 
development  of  the  Great  Northern  Railway  system. 
But  in  these  volumes,  as  in  many  biographies  of  great 
men,  the  authors  often  betray  a  bias  and  misrepresent 
facts  vital  to  an  understanding  of  the  development  of 
both  of  these  railroad  systems.  A  recent  volume  en- 
titled the  Life  Story  of  J.  P.  Morgan,  by  Carl  Hovey, 
although  extremely  laudatory  and  therefore  in  many 
ways  misleading,  contains  valuable  information  about 
the  development  of  the  Vanderbilt  lines  after  1880  and 
also  about  the  financial  vicissitudes  and  rehabilitation 


BIBLIOGRAPHICAL  NOTE  <m 

of  the  many  Morgan  properties,  such  as  the  Southern 
Railway,  the  modern  Erie  system,  the  Northern  Pacific, 
the  Reading,  and  the  Baltimore  and  Ohio. 

Some  cf  the  railroad  companies  many  years  ago  them- 
selves published  histories  of  their  lines,  but  most  of  these 
attempts  were  of  little  value,  as  they  were  always  too 
laudatory  and  one-sided  and  evidently  were  usually 
written  for  political  purposes.  The  best  of  this  cla? a  of 
railroad  histories  was  a  book  issued  by  the  Pennsylvania 
Railroad  many  years  ago,  giving  a  record  (largely  statis- 
tical) of  the  growth  and  development  of  its  lines.  But 
this  book  has  been  long  out  of  print  and  covers  the 
period  prior  to  1885  only. 

For  original  material  on  American  railroad  history, 
one  must  depend  almost  entirely  on  financial  and  rail- 
road periodicals  and  oflScial  and  state  documents.  By 
far  the  most  valuable  sources  for  all  aspects  of  railroad 
building  and  financing  during  the  long  period  from  1830 
to  1870  are  the  American  Railroad  Journal  (1832-1871; 
and  Hunt's  Merchant  Magazine  (1831-1870).  Both  of 
these  periodicals  ire  replete  with  details  of  railroad 
building  and  growth.  And  for  the  period  from  1870  to 
♦he  present  time  the  best  authority  is  the  Commercial 
and  Financial  Chronicle,  with  its  various  supplements. 
The  story  of  modern  railroading  is  so  intertwined  with 
finance  and  banking  that  to  get  any  broad  and  complete 
view  of  the  subject  one  must  consider  it  largely  from  the 
viewpoint  of  Wall  Street.  For  facts  regarding  opera- 
tion and  management  of  modem  railroads,  the  Railroad 
Age-Gazette  also  is  extremely  useful.  By  far  the  most 
valuable  sources  for  railroad  statistics,  railroad  legisla- 
tion, and  all  related  facts,  are  the  annual  reports  and 
bulletins  of  the  Interstate   Commerce  Commission. 


246 


BIBLIOGRAPHICAL  NOTE 


which  have  been  regularly  issued  since  1888.  Many 
state  commissions  also  have  issued  volumes  of  value. 
The  best  account  of  the  origin  of  the  Granger  laws  is 
contained  in  S.  J.  Buck's  The  Granger  Movement  (1913). 
The  beginnings  of  Federal  regulation  are  traced  in  L.  H. 
Haney's  A  Congressional  H' story  of  Railways  in  the 
United  States,  1850-1887  (1910).  The  history  of  recent 
railroad  regulation  by  state  and  Federal  legislation,  and 
of  court  decisions  affecting  the  railroads,  is  clearly  and 
succinctly  told  in  William  Z.  Ripley's  Railroads:  Rales 
and  Regulation  (1912),  and  in  Johnson  and  Van  Metre's 
Principles  of  Railroad  Transportation  (1916). 


INDEX 


Accidents,  reduction  of,  17;  on 
Erie,  70 

Adams.  C.  F.,  225 

Adams.  E.  D.,  plan  of  railroad 
merger,  147 

Alabama  Great  Southern  Rail- 
road. 190 

Albany,  railrobJ  to  Schenec- 
tady. 10,  21;  crossing  of 
Hudson  at,  16-17;  head- 
quarters of  New  York  Cen- 
tral, 26;  through  line  from 
New  York  City  to.  27 

Albany  and  Stockbridge  Rail- 
road, 27 

Alleghany  Portage  Railroad, 
49 

Angus,  R.  B..  169,  171 

Appleton's  Illustrated  Handbook 
of  American  Travel,  descrip- 
tion of  Erie  Railroad,  65-66 

Armour,  P.  D.,  115 

Atchison  (Kan.),  development 
of.lSl 

Atchison,  Topeka  and  Santa 
F«  Railroad,  10.  145,  154 
et  »eq.\  Ripley  as  president 
of,  119,  163;  plan  of  route, 
154;  building  of  road,  155, 
et  »eq.;  financial  difficulties, 
157;  reorganization  (1889), 
161-62;  failure  (1893),  162; 
reorganization  (1895),  163; 
progress  since  1895,  163-64; 
Union  Pacific  and,  207-08 

Atlantic  and  Pacific  Railroad, 
160 

Atlantic  Coast  Line,  188-87 


Attica  and  Buffalo  Railroad, 
26 

Auburn  and  Syracuse  Rail- 
road, 25 

Bacon,  E.  R.,  110 

Baltimore,  railroad  in  1840, 
10;  and  Baltimore  and  Ohio, 
47,  97,  103.  115;  Penn- 
sylvania Railroad  acquires 
line  through,  56;  Southern 
Railway  connection,  191 

Baltimore  and  Ohio  Railroad, 
petition  to  Congress  (1828), 
8;  through  system  by  1875, 
15;  in  1853,  26;  an<!  Read- 
ing, 44,  61.  106.  110.  117; 
Union  Pacific  and.  45.  110- 
117.  118,  206-07,  209;  west- 
ern connections.  47.  48.  52; 
competition.  55.  104;  "com- 
munity of  interest"  idea 
applied  to.  61.  62.  110,  115- 
116.  117;  history  of.  95  H 
seq.\  charter.  98;  con- 
struction, 98-100;  Garrett 
as  president,  101-02,  lOS, 
104-05,  107;  dividends,  104, 
105,  106-07,  109;  expansion, 
105-06,  118;  financial  dis- 
closures, 107-08;  Spencer  aa 
president,  108;  Mayer  m 
presiJjnt,  109;  Cowan  as 
president.  111;  receivership 
(1896),  111,  113;  Morgan 
and,  111-12,  149;  reorgani- 
tation  (1898).  113-14;  Penn- 
sylvania Railroad  and,  10^ 


247 


i48 


INDEX 


Baltimore  and  Ohio — Continued 
115-16.  207.  209;  Willard  as 
president.  118-19;  recent 
record.  119-20;  Southern 
Railway  and.  191 

Baltimore  and  Philadelphia 
Railroad,  105 

Barnard.  Judge,  and  case 
against  Drew.  76,  81,  88.  84 

Belmont.  August.  91 

Bernard.  George,  French  engi- 
neer. 97 

"Big  Four."  see  Cleveland. 
Cincinnati,  Chicago  and  St. 
Louis  Railroad 

Block  signal  system,  in  pre- 
vention of  accidents.  17; 
Pennsylvania  Railroad  first 
uses.  54 

Boston  and  Albany  Railroad. 
41 

Boston,  Hartford  and  Erie 
Railroad,  75,  84,  87 

Brice,  C.  S..  183 

Bridges,  lack  before  Civil  War, 
16-17 

British  Columbia,  Great  North- 
ern in,  176 

Brown,  George,  and  Baltimore 
and  Ohio  Railroad.  97.  98 

Buffalo,  railroad  in  1842,  10; 
New  York  Central  to,  40; 
Erie  Railroad  in,  69 

Buffalo  and  Allegheny  Valley 
Railroad,  57 

Buffalo  and  Niagara  Falls 
Railroad.  25 

Buffalo.  Bradford  and  Pitts- 
burgh Railroad.  77.  78 

Burlington  Railroad,  tee  Chi- 
cago. Burlington  and  Quincy 

Bush.  B.  F..  119 

California,  effect  of  annexa- 
tion on  railroads,  18,  121- 
122 

California  Southern  Railway, 
160 

Canada  Southern  Railway,  S4 


Canals,  96,  m.  railroads,  4-0, 
11,  24;  see  also  Erie  Canal 

Carnegie  Steel  Corporation 
and  rebates,  2S1 

Carroll,  Charles,  of  Carroll- 
ton,  quoted,  98 

Cars,  dining  cars  introduced. 
16;  sleeping  cars,  16,  49; 
first  smoking  car,  49 

"^ass.  General  Lewis,  receiver 
of  Northern  Pacific  (1871), 
142 

Cassatt,  A.  J.,  57-58,  61 

Central  of  (leorgia  Railway, 
187,  191,  208 

Central  Pacific  Railroad,  123- 
124,  126,  1^7,  128,  132, 
155 

Central  Railroad  and  Banking 
Company  of  Georgia,  186 

Central  Railroad  of  New  Jer- 
sey, 106,  117,  207;  see  also 
1 '  ^w  Jersey  Central 

Central  i'rust  Company.  188 

Charleston  (S.  C),  railroad  in 
1840,  10 

Charlotte,  Columbia  and 
Augusta  Railroad,  180,  184- 
185 

Chesapeake  and  Ohio  Railroad, 
44,  61,  62,  115-16 

Cheyenne  (Wy.),  develop- 
ment of,  131 

Chicago,  railroads  to  Atlantic 
coast  from,  14;  industrial 
center,  15;  New  York  Cen- 
tral to,  40;  Pennsylvania 
Railroad  connection  to,  51; 
Erie  Railroad  connection  to, 
89;  through  traffic  routes 
to,  103;  Baltimore  and  Ohio 
in,  115;  Santa  F£  reachea, 
161 

Chicago  and  Alton  Railroad, 
308,  210 

Chicago  and  Atlantic  Railway, 
89 

Chicago  and  North  Western 
Railroad,  S«,  ISO,  US,  208 


INDEX 


249 


Chicago  and  St.  Louis  Rail- 
road, 161 

Chicago,  Burlington  and 
Quincy  Railroad,  western 
expansion,  145,  205;  Hill 
interest  and,  151.  152,  203; 
prosperity,  177-78 

Chicago,  Indianapolis  and 
Louisville  Railroad,  190 

Chicago,  Milwaukee  and  St. 
Paul  Railroad,  45,  208 

Cincinnati,  New  York  Central 
reaches,  40;  Baltimore  and 
Ohio  connection,  103 

Cincinnati  and  Marietta  Rail- 
road, 100 

Cincinnati,  Hamilton  and  Day- 
ton Railroad,  89,  118 

Civil  War,  effect  on  railroads, 
13,  14;  Baltimore  and  Ohio 
during,  102;  through  traffic 
to  Chicago  established  dur- 
ing, 103 

Clermont,  Fulton's  steamboat, 
95 

Cleveland,  New  York  Central 
reaches,  40 

Cleveland  and  Pittsburgh  Rail- 
road, 52-53 

Cleveland,  Cincinnati,  Chicago 
and  St.  Louis  Railroad,  35 

Clinton,  De  Witt,  5 

Clinton.  Colonel  De  Witt.  Jr., 
67 

Clyde  line,  traffic  arrange- 
ments with  Richmond  Ter- 
minal Company,  183 

Colorado  Midland  Railway. 
162,  163 

Colorado  Southern  Railroad, 
177-78,  205 

Columbia  (S.  C),  railroad  in 
1840.  10 

Columbia  and  Greenville  Rail- 
road, 185 

Commissions,  state  railroad, 
225,  228 

"Community  of  interest"  idea, 
43-45,61,62,  no,  n5-l«.  117 


Congress,  Intentate  Com- 
merce Act  (1887),  42,  232; 
Act  providing  for  survey 
from  Mississippi  to  Pacific 
(1853).  122;  Act  of  1862 
creating  Union  Pacific.  123; 
charters  Northern  Pacific 
(1864).  139;  Elkins  Act 
(1903).  234;  Interstate  Com- 
merce Act  (1906),  234-35; 
Adamson  Law,  237-38 

Cooke.  Jay,  141.  142 

Corning.  Erastus.  26 

Cowan,  J.  K.,  Ill 

Credit  Mobilier  of  America, 
125,  120 

Crockers.  interest  in  Central 
Pacific.  126 

Cullom,  S.  B.,  232 

Cumberland  (Md.).  Baltimore 
and  Ohio  completed  to 
(1842),  100 

Denver  (Col.),  development  of 
131 

Denver  and  Rio  Grande  Rail 
road,  131,  157 

Denver  Pacific  Railroad,  132 

Detroit,  New  York  Central 
reaches,  40 

De  Witt  Clinton,  third  loco- 
motive built  in  America,  21, 
46 

Drew,  Daniel,  and  Vanderbilt, 
82-33,  71,  73  et  3eq.;  and 
Erie,  50,  70  et  teq.',  per- 
sonal characteristics,  70-71; 
eliminated  from  Erie  by 
Gould  and  Fisk,  99 

Drexel,  Morgan  and  Company, 
38 

Duluth,  development  of,  ISl; 
distance  from  Pacific,  165; 
Great  Northern  terminui  at 
(IMl),  175 

East  Tennessee.  Virginia  and 
Georgia  Railroad,  180.  181- 
182,  18S,  186,  187 


260 


INDEX 


England,  iteel  imported  from, 
17 

Erie  Canal,  4,  5.  «,  24,  47,  68. 
06 

Erie  Railway,  plan  to  reach 
Great  Lakes,  11,  26,  28;  in 
1875,  15;  rivalry  with  New 
York  Central,  80;  Vander- 
bilt  and,  S2-SS,  71,  73  et 
»eq.;  Drew  and,  50,  70  et 
aeq.;  Gould  and,  52;  com- 
petition, 55;  history  and 
description,  64  et  aeq.;  char- 
ter (1832),  67;  construction, 
67-68;  opened  to  Lake  Erie, 
68-69;  cost  of  building,  68; 
financial  condition  (1851), 
69;  since  1901,  92-94;  Mor- 
gan and,  148;  bibliography, 
244 

Erie  and  Pittsburgh  Railroad, 
52 

Field,  Marshall,  115 

First  National  Bank  of  New 
York,  Hill's  relations  with, 
149-50 

Fisk,  James,  Jr.,  80,  87,  88 

Flying  Dutchman,  car  on  Balti- 
more and  Ohio,  99 

Frederick  (Md.),  Baltimore 
and  Ohio  opens  branch  to 
(1832),  99 

Fulton,  Robert,  and  Clermont, 
95 

Gage,    adoption   of   standard, 

16;    Erie's    use   of   six-foot, 

70 
Garrett.  J.   W.,   101-05,   106, 

107 
Garrett,  Robert,  105 
Geneva  (N.  Y.),  Erie  Railroad 

in.  69 
Georgia  Pacific  Railroad,  182 
Georgia  Southern  and  Florida 

Railroad,  190 
Gilbert,  Judge,   of   Brooklyn, 

and  Erie  lUilway  case,  81 


Gillis.  Judge.  J.  L.,  of  Phila> 
delphia,  account  of  trial  trip 
on  Mohawk  and  Hudson* 
22-24 

Gould,  Jay,  215;  and  Vander- 
bilt,  37;  and  Erie  Railway, 
52,  80,  84.  87-88;  inter- 
ests oppose  Santa  ¥€,  160 

Government  ownership,  9-10; 
see  also  Railroad  regula- 
tion 

Grand  Trunk  Railroad,  15 

Granger  movement,  219-24; 
and  the  railroads,  212-13, 
221;  "Granger  Laws."  224- 
225,  227 

Grant  and  Ward,  effect  of 
failure  on  Erie  Railway, 
90 

"Great  American  Desert," 
131 

Great  Northern  Railroad,  19; 
Harrimanand,  116-17;  com- 
petition with  Union  Pacific, 
136;  Hill's  development  of, 
147.  173  et  aeq.,  202;  name 
of  St.  Paul,  Minneapolis 
and  Manitoba  changed  to, 
173;  and  Northern  Pacific, 
175;  Minnesota  ore  lands, 
176-77;  prosperity,  177 

Great  War  precipitates  govern- 
ment control,  238 

Hamburg  (S.  C),  railroad  in 
1840,  10 

Harlan,  Justice,  on  Inter- 
state Commerce  Commis- 
sion, 233 

Harlem  Railroad,  Vanderbilt 
and,  30-31,  32,  33,  148; 
Hill  buys  coaches  from,  171; 
aee  cUao  New  York  and 
Harlem  Railroad 

Harper's  Ferry,  Balttmcre  and 
Ohio  extends  line  to,  100 

Harper's  Guide-Book  of  th,^  Neu 
York  and  Erie  Railroad  quoU^ 
64 


INDEX 


251 


Harriman.  E.  H.,  and  Udiod 
Pacific,  4S,  116,  193  et  aeq.; 
"community  of  interest" 
idea,  43,  44-45,  61.  116-17; 
and  Eric  reorf^anization,  91; 
Hill  and,  150-58,  175-76, 
202  et  acq.;  and  Central  of 
Georgia  Railway,  191,  208; 
compared  with  Morgan,  198; 
death  (1009).  208 

Harrisburg  (Penn.),  Pennsyl- 
vania oonstructs  line  to,  48 

Harrison,  Fairfax,  119 

Hartford  (Conn.),  railroad  in 
1840,  10 

Helena  (Mont.),  development 
of,  131 

Hepburn  Committee,  231 

Hill,  J.  J.,  and  "community  of 
interest"  idea,  61,  116; 
and  Baltimore  and  Ohio, 
115;  and  Great  Northern, 
147,  173  et  »eq.;  Morgan 
and,  149-50,  153,  202  et 
seq.;  and  Northern  Pacific, 
150,  153;  and  Harriman, 
150-52,  175-76,  202  et  seq.; 
growth  of  Hill  lines,  165  et 
seq. ;  personal  character- 
istics, 166-67;  "Hills  Folly," 
171;  St.  Paul,  Minneapolis 
and  Manitoba  Railroad,  171- 
173 

Hocking  Valley  Railroad,  149 

Holland,  St.  Paul  and  Pacific 
financed  in,  170 

Hopkins.  Mark,  126 

Hours  of  labor,  eight-hour  day, 
237 

Hudson  and  Berkshire  Rail- 
road, 25 

Hudson  River,  bridge  at  Al- 
bany, 17 

Hudson  River  Railroad,  12, 
27-28,  31;  and  New  York 
Central,  25;  Vanderbilt  and, 

^  32,  148 

Hudson's  Bay  Company,  Hill's 
relations  with.  167-68 


Huntington.  C.  t»..  126,  ISS, 
135.  16a  200-01 

Illinois,  railroad  speculation 
in,  9;  development  after 
1870.  34;  Vanderbilt  lines  in. 
34,  52 

Illinois  Central  Railroad,  119; 
Federal  grant  to,  13;  Harri- 
man and,  45,  191.  196,  200; 
extent,  207;  and  Central  of 
Georgia,  208;  Union  Pacific 
and,    210 

Indiana,  railroad  speculation 
in,  9;  development  after 
1870,  34;  Vanderbilt  lines 
in,  34,  52;  Chesapeake  and 
Ohio  in,  44;  Erie  develop- 
ment in,  92,  93 

Indianapolis,  Vanderbilt  lines 
to.  40 

Inman.  J.  H.,  186 

Interstate  Commerce  Com* 
mission,  209,  232-33,  2S4- 
235 

Inventions,  influence  on 
United  States.  1 

Iowa,  railroads  in,  18.  36,  121; 
Pennsylvania  Railroad  ex- 
tends to,  57;  "Granger 
Laws,"  224-25;  commission 
established,  228 

Jersey  City.  Pennsylva  i  la  Rail- 
road develops  line  to,  56; 
Erie  directors  go  to,  82 

Jewett,  H.  J.,  88,  89,  90 

Kansas,  railroads  in,  36 
Kansas  and   Pacific  Railway, 

143 
Kansas  City,  development  of, 

131 
Kansas  Pacific  Railroad,  ISO, 

132, 155 
Kellcy,  O.  H.,  219 
Kennedy.    J.     S..     170.     171 

174 
King,  John,  90 


25« 


INDEX 


Kittson.  N.  W.,  167.  171 
Kuhn.  Loeb  and  Company.  43. 
194 

Lake  Shore  ami  Michigan  Kail- 
road.  34,  44.  117.  207 

Land  grants.  173;  to  Illinois 
Central.  13;  to  Northern 
Pacific.  139-40:  to  Atchison. 
Topeka  and  Santa  Fe.  155 

Lehigh  Valley  Railroad.  92 

Lincoln.  Abraham,  signs  bill 
authorizing  Union  Pacific. 
19 

Long  Island,  Pennsylvania 
Railroad  on,  60 

Long  Island  Railroad.  60 

Los  Angeles,  Santa  Fe  enters. 
160-61 

Louisville  and  Nashville  Bail- 
road.  119.  187.  190 

Lovett.  Judge  R.  S.,  208 

McAdoo.  VV,  C...  239-40 

Massachusetts  railroad  com- 
mission. 225 

Mayer,  C.  J.  109.  Ill 

Memphis  and  Charleston  Rail- 
road. 181 

Mexican  Central  Railroad. 
133 

Michigan,  railroad  speculation 
in,  9;  opening  up  of.  34; 
Vanderbilt  lines  in.  34 

Michigan  and  Southern  Rail- 
road. 12 

Michigan  Central  Railroail. 
34 

Minneapolis,  development  of. 
131 

Minnesota,  opening  up  of,  34; 
railroads  in.  36;  crop  failure, 
166;  discovery  of  ore  de- 
posits in.  17* 

Mississippi  River,  as  highway, 
11;  end  of  supremacy  as 
transportation  route.  14;  as 
Western  railroad  terminus. 
18 


Missouri,  railroads  in.  18,  86, 
121;  Pennsylvania  Railroad 
extends  to.  57 

Missouri  Pacific  Railroad, 
119 

Mobile  and  Ohio  Railroad, 
13,  190 

Mohawk  and  Hudson  Railroad, 
first  Vanderbilt  mad.  21, 
25;  account  of  trial  trip,  22- 
24,  46;  original  construction, 
24 

Morgan.  J.  P..  Vanderbilt  and, 
38.  39.  !a);  "community  of 
interest"  idea,  44-45,  61; 
and  New  York  Central,  45; 
reorganization  of  Erie,  90- 
91.  148;  as  reorganizer  of 
railroads.  148-49;  and  Hill. 
149-50.  153,  202  et  seq.\  and 
Union  Pacific.  149.  194,  195; 
and  Southern  Railway,  188- 
189;  and  Central  of  Georgia 
Railway.  191 ;  compared  with 
Harriman.  198 

Morse,  C.  W..  191.  208 

Mount  Stephen,  Lord,  174: 
see  also  Stephen,  George 

New  Haven,  railroad  in   1«4() 

to,  10 
New   Jersey   Central,   44,   61; 

see  also  Central  Railroad  of 

New  Jersey 
New   Orleans,   effect   of   river 

traffic    on,    11-12;    business 

shifts  north  from,  15 
New    York    (State),    railroa<is 

(1842),  10 
New  York  and  Erie  Railroad, 

see  Erie  Railway 
New  York  and   Harlem  Rail- 
road, 12.  27;  see  also  Harlem 

Railroad 
New    York    Central    Railroad, 

119,  217;  through  system  by 

1875.  15;  steel  used  on.  17; 

Vanderbilt  and.  20,  21.  32, 

3<!,  148;  single  track  in  1866. 


INDEX 


i5S 


New  York  Central — Continued 
21;  consolidation  to  form 
(1853).  «4-«6;  connection 
with  New  York  City,  30; 
further  consolidation  (1869), 
33;  state  investigation,  37; 
Morgan  and.  38-39,  45; 
growth  (1883-93),  40;  entry 
into  New  England.  41-48; 
"community  of  interest" 
idea  applied  to,  44,  61; 
llarriman  and,  45,  206; 
in  1019,  46;  Union  Pacific 
and.  208 

New  York  Central  and  Hud- 
son River  Railroad,  33, 
46 

New  York,  Chicago  and  St. 
Louis  Railroad,  35 

New  York  City,  effect  of  Erie 
Canal  on,  5;  railroads  in 
1840.  10;  New  York  and 
Harlem  Railroad  in,  27; 
New  York  Central  and,  29; 
railroad  approaches  to,  30; 
\'anderbilt  lines  in,  40; 
monetary  center,  47;  Penn- 
sylvania Railroad  enters, 
51,  59;  Cassatt  and,  58; 
real-estate  speculation  by 
Erie  Railway,  88;  Baltimore 
and  Ohio  connection,  104, 
106,  110;  rates  from  Chicago 
to,  104;  Southern  Railway 
connection.  191 

New  York.  Lake  Erie  and 
Western  Railroad.  89 

New  York,  New  Haven  and 
Hartford  Railroad,  45,  60; 
see  also  New  Haven 

New  York,  Pennsylvania  and 
Ohio  Railroad,  89 

New  York,  Susquehanna  and 
Western  Railroad,  91-92 

New  Y'ork  Tribune  on  Grange 
politics,  223 

New  York,  West  Shore  and 
Buffalo  Railroad,  35 

"Nickel      Plate"     route,     are 


New  York,  Chicago  and  St. 
Louis  Railroad 

Norfolk  and  Western  Railroad, 
61,  116,  1H2 

North  Carolina  Railroad.  179- 
180 

Northern  Central  Railroad.  57 

Northern  Pacific  Railroad,  19; 
"community  of  interest" 
idea  applied  to,  110,  117; 
Oregon  connections.  138; 
competition  with  Union 
Pacific,  136;  chartered 
(1864),  139;  land  grant 
to,  139-40;  Jay  Cooke  and, 
141-42;  failure  (1873),  142, 
166;  Villard  and,  143-44; 
receivers     appointed,     146; 

Slan  of  merger  with  Great 
^  Northern,  147-48;  reorgan- 
ization by  Morgan,  148-50; 
prosperity,  152-53;  Hill  and, 
202,  203;  Harriman  and, 
203-06 

Northern  Securities  Company, 
151-52,  176,  204,  205 

Northwest,  development  of, 
41 

North  Western  Railroad,  see 
Chicago  and  North  Western 
Railroad 

Ogdensburg  and  Lake  Cham- 
plain  Railroad,  42 

Ohio,  railroad  speculation  in 
9;  effect  of  railroads  in,  34; 
Vanderbilt  lines  in,  34,  52; 
Chesapeake  and  Ohio  in, 
44;  Erie  development  in, 
92,93 

Ohio  and  Mississippi  Railroad. 
100 

Olcott,  F.  P.,  187 

Oregon  and  Transcontinental 
Company,  142,  143.  144, 
145 

Oregon  Railway  and  Navi- 
gation Company.  133.  134, 
143 


to4 


INDEX 


Oregon  Short  Line  Railroad, 
133.  145,  140 

Oregon  Steamship  and  Navi- 
gation Company,  133 

Osgood,  Vanderbilt's  son-in* 
law,  83 

Pacific  Mail  Steamship  Com* 
pany, 136 

"Pan  Handle"  route.  53 

Panics  (1837),  10.  47,  68. 
100;  (1857),  13.  «6,  101; 
(1873).  157,  «<2;  (1884), 
144.  (1893),  110.  16«.  187- 
188 

Parkersburg  (Va.).  Baltimore 
and  Ohio  branch  to,  100 

Parkman,  Francis.  Oregon 
Trail,  cited,  138 

Paterson  and  Hudson  River 
Railroad,  70 

Patrons  of  Husbandry,  see 
Granger  movement 

Pennsylvania,  Vanderbilt  lines 
in,  34 

Pennsylvania  Canal,  40 

Pennsylvania  Coal  Company, 
92 

Pennsylvania  Company  formed 
(1870),  52 

Pennsylvania  Fiscal  Agency, 
125;  see  also  Credit  Mobi- 
lier 

Pennsylvania  Railroad,  15,  26, 
119;  expansion,  28.  53-54, 
55;  Drexels  as  fiscal  agents, 
38;  "community  of  interest" 
idea  applied  to,  44;  history 
of,  47  et  seq.\  incorporated 
(1846),  48;  Thomson  as 
head  of,  49-51;  and  Balti- 
more and  Ohio,  104,  115-16, 
207,  209;  and  Richmond 
and  Danville,  179,  180;  and 
East  Tennessee,  Virginia  and 
Georgia,  180;  Southern  Rail- 
way Securities  Company  and, 
180-81;  Southern  Railway 
and,  191 


Philadelphia,  railroad  in  1R4C 
10;  commercial  importanc* 
inenac-ed,  47;  Pennsylvania 
Railroad  u&  aid  to.  48;  Balti- 
more und  Ohio  to,  105,  115; 
Southern  Railway  connec- 
tion. 191 

Philadelphia  and  Columbia 
Railroad,  48-49 

Philadelphia  and  Reading  Coal 
and  Iron  Company,  117 

Philadelphia  and  heading 
Railroad,  106,  110.  117; 
see  also  Reading  Railroad 

Philadelphia,  Wilmington  and 
Baltimore  Railroad.  lOG 

.'ittsburgh,  Baltimore  and 
Ohio  to,  47.  48.  103;  .  id 
Pennsylvania  Railroad,  48, 
58 

Pittsburgh.  Cincinnati.  Chi- 
cago and  St.  Louis,  Railroad, 
53 

Pittsburgh,  Fort  Wayne  and 
Chicago  Railroad,  51 

Portland  (Ore.),  development 
of.  131 

Pruyn.  J.  V.  L..  26 

Public  Works.  49 

Pullmans,  introduction  of,  16 

Queen  and  Crescent  route,  186, 
190 

Railroad  regulation.  Inter- 
state Commerce  Act  (1887), 
42,  232;  Sherman  Anti- 
trust Act  (1890).  42, 1 16, 151, 
209;  Union  Pacific  forced 
to  dispose  of  holdings, 
62;  "Granger  Laws,"  224- 
225.  227;  commissions,  225, 
228;  demand  in  East  for. 
229-30;  bills  to  regulate 
interstate  commerce,  231- 
232;  Interstate  Commerce 
Act  (1906),  234-35;  bibli- 
ography, 246;  see  also  Gov- 
ernment ownership 


INDEX 


25A 


Railroads,  influenceon  develop- 
ment in,  of  Inited  States, 
l-i:  history  of,  i  tt  teg.; 
M.  ranaU,  4-0,  11,  i4; 
objtrtiun  to  dteam,  7;  early 
lines  in  I  nited  States,  7-12; 
first  stage  of'  development 
(to  1850),  li,  during  Civil 
War,  ia-14;  second  stage  of 
activity  in  United  States 
(18«0-75),  14;  construction 
of  ^reat  trunk  lines,  14,  15; 
adoption  of  standard  gage. 
Id;  improvements,  1«-17, 
18;  transcontinental  lines, 
18-19,  121  et  aeq.\  compe- 
tition, 104,  216-19;  prob- 
lems connected  with,  211 
ft  »eq.\  overbuilding.  214; 
during  (Irent  War,  238- 
241 

Rails,  history  of  use  of,  2-S; 
Pennsylvania  first  uses  steel, 
54 

Rainupo  and  I'aterson  llail- 
roud,  70 

Rates,  reduction  due  to  com- 
petition, 104,  110;  on  Balfi- 
more  and  Ohio,  100;  "battie 
of  the  rate,"  212-13;  "Gran- 
ger Laws,"  224-25,  227; 
Interstate  Commerce  'om- 
niission  and,  235-3(;,  i.iy 

Reading  UaiIroa<l,  "com- 
munity of  interest"  idea 
applied  to,  4 J,  fil;  Balti- 
more and  Ohio  and,  61.  117. 
207;  Morgan  and,  149;  see 
alio  Philadelphia  and  Read- 
ing Railroad 

Reagan.  »)f  Texas,  bill  to  regu- 
late interstate  commerce, 
231 

Ream.  X.  B.,  115 

Rebates,  230-31.  234 

Regulation,  aee  Railroad  regu- 
lation 

Reinhart.  J.  \V..  162 

Richmond,  Dean.  26 


Richmond  and  Danville  Rail- 
road. 179,  180.  18k.  184. 
185.  187 

Richmond  and  West  Point 
Terminal  Railway  and  Ware- 
house Company.  110. 182. 183 
tt  aeq. 

Richmond,  Fredericksburg  and 
Potomac  Railroad.  56.  191 

Ripley.  E.  P..  119,  163 

Roads,  National  Pike.  96 

Roberts.  G.  B..  55.  57 

Rochester  and  Syracuse  R«il« 
road.  85 

Rock  Island  Railroad.  145 

Roosevelt,  Theodore,  234 

Rutland  Railroad,  42 

St.  Louis,  railroads  to  Atlantic 
coast  from,  14;  becomes 
industrial  center,  15;  Van- 
derbilt  lines  reach,  40;  Balti- 
more and  Ohio  connection 
to,  100,  103,  115 

St.  Louis  and  San  Francisco 
Railway,  100,  162,  163 

St.  Paul,  development  of,  131; 
Hill  in,  166-67 

St.  Paul  and  Pacific.  Northern 
Pacific  and.  166;  Hill  and, 
167-71  ;"Hilis  Folly,"  171 

St.  Paul,  Minneapolis  and 
Manitoba  Railroad,  171-73 

St.  Paul  Railroad,  tee  Chi- 
cago, Milwaukee  and  St. 
Paul  Railroad 

Salt  Lake  City,  development 
of.  131 

Sandusky,  Baltimore  and  Ohio 
at,  103 

Santa  Fe  Railroad,  tee  Atchi- 
son, Topeka  and  Santa 
F6 

Schenectady,  railroad  in  1840, 
10;  Mohawk  and  Hudson  to. 
21 

Schenectady  and  Troy  Rail- 
road. 25 

Schiff.  J.  H..  194-95 


256 


INDEX 


^huylkill  Eaiit  Side  Railway. 
106 

Scott.  T.  A..  55.  57 

Scranton  (Fenn.).  Krie  Kail- 
road  ill,  09 

Seattl<-.  development  of.  l.il 

Sher?ii.  n  Aiili-lrust  Law 
(IhttO;.  4<,  llfl.  1.51.  209 

Sickles,  (jfiKTuI  i).  <*'  ,  88 

Sioux  City  (la.),  development 
of,  131 

Sloan.  Samuel,  iH 

Smith,  D.  A.,  108,  171;  »te 
also  Strathcona,  Lord 

Smith,  John,  Colony  of  New 
York  appropriates  money 
for  road  to,  60 

Sonora  Railway,  130 

South,  railroad  system  of  the, 
179  et  seq. 

Southern  Pacific  Railroad,  10; 
Union  Pacific  and,  45,  Qi, 
'201,  209;  expansion,  132- 
133;  Southern  Pacific  Com- 
pany formed,  133,  13.^; 
Santa  Fe  secures  rights 
from,  160-61;  Harriman  and. 
200-01 

Southern  Pacific  Railroad  of 
California.  132 

Southern  Railway.  119,  181; 
Harrison  president  of.  110; 
Morgan  and,  149,  189;  im- 
provement, 191-92 

Southern  Railway  Securities 
Company,  180-81 

Spencer,  Samuel,  108,  109,  111 

Standard  Oil  Company  and 
rebates,  213,  231 

Stanford,  Leiand,  120 

Staten  Island  Rapid  Transit 
Company   106 

Stephen,  George,  139. 170, 171; 
tee  aito  Mount  Stephen.  Lord 

Stephenson,  George,  invents 
locomotive,  S,  7, 

Stevens,  John,  of  Hoboken, 
advocates  railroad,  4;  con- 
structs locomotive  (1826),  7 


Strathcona,     Lord.     16h,     174; 

»ee  aim  Smith,  D.  A. 
.Subsidies,    for    I'nion    Pacific, 

123;  CenlrnI  Pacific  receivs, 

120 
Supreme        Court,        decision 

aguiiist  "pooling,"  110.  234; 

Granger  cases,  228-20;  and 

rate     fixing,     232:     upholds 

Adamson  Law,  238 
Sweeney,  P.  B..  83 
Syracuse  and  .\ttica  Railroad, 

25 

Texas    and     Pacific    Railroad, 

160 
Thayer,  Nathaniel.  20 
Thomas.  E.  H.,  91 
Thomas,  P.  E.,  97,  98 
Thomson,  Frank,  57 
Thom.son,  J.  E.,  49-50 
Tonawandu  Railroad,  25 
Topeka,  development  of,  131 
Town.send,  Lsuac,  26 
Tran.scontinental  lines,  18-19, 

121  c<  seq.\  tee  also  names  of 

railroads 
Transportation,    canal    boats, 

4;  steamboats,  4,  11-12;  tee 

alto  Canals,  Railroads 
Troy    and     Greenbush     Rail- 

ronc'    28 

I'nderwood,  F.  D.,  92 

Onion  Pacific  Railroad,  105- 
160;construction  authorized, 
19,  123;  Harriman  and,  43, 
45,  193  rt  teq.\  "com- 
munity of  interest"  idea 
applied  to,  45,  69.  116; 
and  Ualtimore  and  Ohio, 
118:  construction,  123-26, 
155;  contest  with  Central 
Pacific,  127;  cost,  128-29: 
expansion,  132,  145;  finan- 
cial failure  (1893),  134-35, 
competition,  135-36;  Mor- 
gan and,  140,  199;  since 
1009,  208-10 


INDEX 


«5T 


Union  Pacific.  Denver  and 
Guir  lUilroati,  1S4 

Tniied  Railroad  and  Tanal 
Company,  51 

I'nited  States  Steel  Corpora- 
tion, 176,  177 

I'tica  and  Schenectady  Rail- 
road. iS 

Vanderbil'..  Cornelius.  50,  148; 
enters  railway  field  (1860), 
13-14,  29-30;  and  New 
York  Central,  17-18.  iO  et 
seq.,  826;  early  life.  89; 
and  Harlem  Railroad.  31. 
83;  buys  Hudson  River 
Railroad,  32,  33;  and  Erie 
Railway,  32-33,  71,  73  et 
»eq.\  succeeded  by  son,  34; 
and  Drew,  32-33.  71.  73  et 
»eq, 

Vanderbilt.  W.  H.,  succeeds 
his  father,  34;  criticism  of, 
30!  and  Morgan.  87-40 

Vanderbilt.  W.  K..  41 

\  anderbilt  lines.  21.  33-34.  SA- 
36.  40-42.  45 

Vibbard.  Chauncey.  26 

Villard,  Henry,  134,  143-45. 
146 

Virginia  railroadopened(  1856), 
179 

Virginia  Midland  Railway.  182, 
184 


Washington  (D.  C).  railroad 
in  1840,  10;  Pennsylvania 
Railroad  acquires  line  to,  56; 
Baltimore  and  Ohio  branch 
to.  100;  Southern  Railway 
connection,  191 

Watt,  James,  inventor  of  steam 
engine,  3 

West  Jersey  and  Seashore 
Railroad.  56 

West  Shore  Railroad.  217 

Western  New  York  and  Penn* 
sylvania  Railroad,  57 

Western  North  Carolina  Rail- 
road, 184 

Westinghouse  air-brake,  17 

Wheeling,  Baltimore  and  Ohio 
line  to  (1853).  100 

Willard.  Daniel.  91.  118,  119 

Wilmington  (Del.).  Penn- 
sylvania Railroad  acquires 
line  through,  56 

Wilson.  Woodrow,  places  rail- 
roads under  government 
control,  239 

Wisconsin,  opening  up  of.  34; 
rai'i'oads  in.  36;  Potter  bill. 
224-r5;  commission  estab- 
lished. 228 

Wisconsin  Central  Railroad, 
145,  146.  147.  149 

Work,  Frank,  76 

York,  steam  locomotive,  99 


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